Fictitious discounts advertised in Egyptian automotive market

Market indicators illustrate some companies sell certain cars below fair prices, experts say

The Egyptian automotives market is seeing a range of fictitious discount offers on car prices. The prices advertised are the original prices of the car, after they increased in the past few months. Some companies, however, offered discounts as part of their plan to increase sales and meet the clients' needs at the expense of their revenues.
Most of the automotive companies announced discount offers on cars, while at the start of this month, 50 car model prices increased. Another 58 car model prices increased in April, including the cars offered now with discounted prices.
Experts said market indicators point to most automotive companies selling some of their cars below their fair prices, despite the customs decrease on European cars imported to Egypt.
Some international companies did not increase the price of their new car models. However, car prices are still witnessing an increase for two months.
A number of automotive companies sell their cars from their stocks, while others justify the increase with the lower exchange rate of the Egyptian pound. Some companies, on the other hand, did not import in the first quarter of this year.
Mohamed Anwar, head of the Vehicles Committee at the Consumer Protection Agency (CPA), told Daily News Egypt that the discount offers after some prices increased are considered false offers for the current car prices.
Anwar stated that the current consumer protection law did not give the right to the agency to deal with this case. The law will not categorise these offers as false ones, according to Anwar.
These offers are made by the automotive companies after an agreement between them on the cars prices, so that the price would be unified across the country, Anwar said, adding that this is hardly called deceit, but is categorised under monopolisation. The CPA is the authorised entity to deal with such cases.
As for listing these offers as "false offers", Anwar said that the CPA is studying the situation to categorise soothe offers as such in the new consumer protection law. He added that the law is still being discussed with the civil society organisations to reach a recommendation by the organisations for this to be in the new law.
On the other hand, car expert Raafat Masrouga said that discounted offers on cars by some companies are a correction to a marketing error.
Masrouga added that companies sell cars at a fictitious price, which leads to overpricing. This indicates that demand is high on this car, so the company increases the price to gain more revenues.
When the car price increases, the company observes lower demand on the car. This way, the companies offer their cars with discounted prices as a correction to a marketing error by the company.
Masrouga declared that the dollar exchange rate against the Egyptian pound has nothing to do with the increase in the cars prices. If companies import their cars, car parts, or the spare parts of the car, most of them use the euro, especially as its exchange rate is decreasing, according to Masrouga.
The car expert said that most of the companies justify the increase in their car prices by saying that the dollar exchange rate increased. However, these companies have been selling from their stock since the end of 2014. They also use the euro only if they are going to import, to avoid the dollar exchange rate crisis.
On the other hand, Alaa Elsaba, Chairman of Elsaba Automotive, said the discount on car prices is a way to attract clients, adding that these offers mean for the companies to have a stock of the cars offered.
Elsaba confirmed that the increase in car prices while there are cars in stock is only a correction of the high prices, which would go back to their real price. Most of these companies then fix the offers permanently.
Raouf Ghabbour, Chairman of the Board of Directors and Chief Executive Officer of Auto Ghabbour, said that in the next period, car prices will witness increases in light of the Egyptian pound's lower exchange rate against the dollar.
Ghabbour added that sector workers cannot bear the increase in customs and taxes completely for the sake of the consumer.
"At the start of the year, the dollar exchange rate was at EGP 7.12, but recently it has gone up to more than EGP 7.65. This has to be reflected on prices so that there would be a balance in revenues of the sector," said Ghabbour.
Auto Ghabbour, Hyundai, Geely, and Mazda agents in Egypt, decided to raise all car model prices. The Geely Emgrand 7's price went up by EGP 1,500 in April. The Geely Pandino and Geely X Pandino's prices increased by EGP 3,000 in April and another EGP 1,500 in May. The price for both cars is now up by EGP 4,500 in total.
The Hyundai Verna's price, on the other hand, increased by EGP 3,750 to reach EGP 83,600 in April and May. As for the Hyundai Accent, its price went up by EGP 3,590 to EGP 128,400. The Hyundai I10's price is now at EGP 90,400, an increase of EGP 2,500 in April.
All Kia models also witnessed price increases at the start of this month, in addition to April's price rises. The Kia Carens' price was up by EGP 3,000 in May and by another EGP 3,000 in April.
The Kia Cerato's price, on the other hand, reached EGP 142,900 after it was at EGP 136,900 by the end of March. The total price increase for the car is at EGP 6,000. The Kia Rio's price went up by EGP 3,500 in May and by EGP 3,000 in April.
Previously, Bavarian Auto Group, BMW's agent in Egypt, raised the price of 10 models in April, in addition to an increase in Mitsubishi Lancer EX's price by EGP 1,000. Auto Jameel also raised the Ford Fiesta's price by EGP 1,500. Honda, on the other hand, witnessed a price increase for its Civic and City models between EGP 6,000 and 12,000 last month.