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As luxury car sales slip abroad, new BMW lines roll into Egypt
Published in Daily News Egypt on 19 - 11 - 2008

CAIRO: As the sun set vibrantly over the Kattameya Heights country club earlier this month, reporters and businesspeople crowded to watch executives whisk white sheets off a pair of BMW 3 Series models, recently imported by Bavarian Auto Group (BAG).
Amid the poolside banter that followed, there was little mention of the supply-cutting and target-slashing gripping most of the world's automakers.
Across the Mediterranean, the tone was less upbeat. The day before the unveiling, the Bavarian Auto Group's supplier BMW announced that their net profit crashed 63 percent and sales fell 9 percent in the third quarter this year.
The bad news has been echoed throughout much of the developed world. In October, car sales in the United States dropped to their lowest level in nearly a quarter of a century. In Europe, new car sales fell 14.5 percent in October, notching six straight months of declines.
BMW said they could no longer predict specific earnings for 2008, but that the numbers would be positive.
In Egypt, BAG was not much more forthcoming. "My boss asked me, don't talk about it, said the group's general manager Ralf Follmann with a laugh when he was later asked about the financial crisis.
Company policy prohibits him from speculating too much and there are already enough people fanning rumors, he said. "We are in the car business, we are not making politics.
As for his supplier's activities, Follmann said he could not guess about that either. "I'm not working for them, he said. "I don't know what they are planning or what they are doing.
But while he declined to give figures, Follmann said business in Egypt remains sturdy. "I personally have the feeling that Egypt fortunately is not really affected by the global financial crisis like most of the other countries in the world, he said. "On our side we have our plans and we are ready to take the challenge and I think we'll get out of it stronger.
In Egypt, passenger car sales have grown by nearly 30 percent per year since 2001. Though inflation and the financial crisis have tempered expectations this year, car sales are expected to reach 200,000.
Demand has been fueled by economic growth, the expansion of financing and a dearth of good public transportation, analysts say.
Menatallah Sadek, a consumer goods analyst at the investment bank Beltone Financial, has recently revised her expectation that sales would grow by 15 percent in 2009. Due to the financial crisis and its effects, she now expects sales will simply hold steady, she said.
But even this is a good sign, she said. "If you don't have a decline, I think that's very good with this state in the world.
Despite cutting production by at least 40,000 cars, BMW's head office said it saw "sharp growth across developing regions in Eastern Europe, Latin America and Asia.
The appetite for luxury cars so far appears healthy in Saudi Arabia, Egypt's oil-rich neighbor. Last month in Jeddah, a big luxury auto show drew brands like BMW, Ferrari and Maserati.
"I have to admit that the premium car market even grew by a larger percentage than the other market segments [in Egypt] in the last three years, Follman said.
Because of import tax reductions in 2004, when the state more than halved customs duties on some cars with engines up to 1.6 liters, BAG has been able to market a new class of cars here, Follmann added.
BAG imports cars with engines smaller than 1.6 liters, including the BMW 1 Series, 316i, 316i coupe and MINI brand cars. But customs are still high for many premium cars, and so his company assembles the 5 Series, 7 Series, some of the 3 Series and the X3 models in Egypt, Follmann said. "[This] allows us to grab the biggest share of the premium 'luxury' customers, he said.
The revitalization of the Egyptian banking sector and the accompanying growth of car financing have also helped sales recently, Follmann said. Several years ago, customers could only finance small cars, but can now do the same for cars costing over LE 200,000, he said. "This was not possible before, Follmann said. "There are more chances for people to finance.
BAG is now expanding their offerings. Earlier this month they introduced the BMW 3 Series to Egypt, including the 320i, 318i, 330i models. They are also starting assembly of "BMW's flagship the BMW 7 Series 750 Li, Follmann said.
Speaking at the launch, Farid El-Tobgui - executive board member of Bavarian Auto Group - said, "Bavarian Auto's plant in Sixth of October, which is the only plant worldwide that was granted the approval . to produce the 7 Series, will assemble the new BMW 750 Li with a special assembly line.
This is where the company assembles the BMW 3, 5, X3 and 7 Series as well as brands like Mahindra and Brilliance.
Sadek suggested that BMW may be introducing the new, cheaper 318 model to give customers a cheaper option. "I think luxury will be hit more than other brands, she said in reference to the effects of the financial crisis.
She recently saw a used BMW with only 19,000 km on sale at a large discount, she said.
"Their (BMW's) clientele is primarily professionals, she said. "Professionals will not lose their jobs, but they might be scared to spend on luxury cars.
Follman, who has been selling cars in Egypt for two years, said he is confident.
"Egypt is always a very challenging market for all of us, he said. "There are again and again new chances to improve this market, especially in the car business.


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