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Asian automakers accelerate competition in Egypt
Published in Daily News Egypt on 13 - 12 - 2010

CAIRO: Major Asian automakers, including Toyota, Mitsubishi as well as Hyundai and Kia, are increasingly staking their claims over Egypt's auto market.
“Competition is getting stronger,” Kamal Khedr, an analyst at Cairo-based investment bank Beltone Financial, told Daily News Egypt.
Tamer El-Haggar, CEO of Synovate Middle East and North Africa, a global market research firm, said in a statement that 2010 “witnessed the arrival of several new car brands into the market, which naturally led to high competition.”
While Khedr said it remained unclear when and which automakers would choose to set up assembly lines in Egypt, he pointed out that demand is growing, making the local market “lucrative,” which in turn is driving competition.
According to a Synovate study released in October, “Recent statistics by the Egyptian Customs Authority have…revealed that KIA topped the list of imported cars over the past eight months, representing 28.71 percent of total imports.”
Khedr said that Hyundai, through GB Auto, owns a leading slice of the market, with 28 percent, and that Chinese brands, such as Speranza, are grabbing a larger share of the local auto market.
Egypt's auto market grew by 18 percent year-on-year from September 2009, with 144,739 units sold by September 2010, which was, in fact, a “weak year” in comparison to previous ones, the Beltone analyst noted.
He added that Beltone expects the passenger car market in Egypt to grow by 22 percent in 2010 to reach 193,890 units. A growth of 15 percent is forecasted for 2011 to 222,973 units.
El-Haggar provided his take, stating that Egypt's automotive sector is without doubt expanding: “The Egyptian automotive market is one of the fastest growing in the region due to the government's policies that encourage expansion and modernization of workshops and service stations. Strong sales are expected to continue in the coming years.”
He cited a report by Business Monitor International, which predicts that “total automotives sales will increase from $9.48 billion in 2009 to $23.54 billion in 2014, a rise of 148 percent.”
Japanese automaker Toyota announced this week that it would establish a manufacturing base in Egypt in 2011, according to a statement made by Minister of Trade and Industry Rachid Mohamed Rachid during a visit to Tunisia.
Rachid recently met with Toyota officials who expressed their desire to set up shop in Egypt due to the country's strong technical and human capabilities, Al-Masry Al-Youm reported.
The finer details about Toyota's foray into the Egyptian market have yet to be revealed to the public, and Khedr said that it's impact is still difficult to assess.
Toyota will produce about 3,000 vehicles in Egypt, he said, paling in comparison to the 30,000 per year that Ghabbour Auto (GB Auto) currently delivers to the market, which will more than double to 80,000 units by 2011.
This news comes on the heels of Japanese auto giant, Mitsubishi Motors Corporation, announcing that it too will expand its presence in Egypt.
The rival Japanese firm signed in early December a distribution deal with Diamond Motors, a joint venture between Al Mulla Group, Al Kharafi Group and Smart Car. The new contract will set up a network of integrated service centers (sales, maintenance and spare parts) with up to $100 million investment over the next three years.
Moreover, it was recently announced by Prime Minister Ahmed Nazif that the government will introduce a mechanism for the planned drawbar trailer replacement program before 2011, AlembicHC said in a note, citing Al-Ahram newspaper.
AlembicHC said that the drawbar trailer replacement program will be a “catalyst” for GB Auto, adding that the final number of replacements has yet to be announced, but that around 22,000 units are expected based on previous government estimates, of which the firm anticipates GB Auto “to capture about 40 percent.”
Toyota's and Mitsubishi's future activity in Egypt bode well in light of Synovate's recent market research, which concluded that Egyptian consumers have a preference for Japanese made passenger vehicles over other Asian manufacturers.
While a crushing majority of Egyptian consumers — 78 percent — actually have a predilection for German cars, Japanese automakers came in second place, with 16 percent.
Three percent of consumers favor America cars, with the remainder selecting French, Chinese and Korean cars as their top choices.
Although local consumers expressed a general preference for German cars — and even American vehicles over their Korean competitors, when asked what type of car Egyptian consumers intended on purchasing in the coming 12 months, 15 percent selected Kia, and another 13 percent chose Hyundai as their brands of choice; another 8 percent selected either Toyota or Chevrole.
Despite a significant portion of Egyptian consumers who plan on purchasing new market entry brands, El-Naggar underscored that his firm's study demonstrates that “consumer's perception of the new brands is still low compared to the more established German and Japanese brands.”


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