Supporting feeding industries may be government door to manufacture Egyptian cars

Sector awaits incentives to launch, boost investments is linked to announcing the automotive strategy

Automotive feeding industries officials urged the need to announce the automotive manufacturing strategy, in order to discover the incentives to be granted by the state to companies so that they can invest further, as the first step of manufacturing a local car begins from the feeding industries sector.
Khalid Khalil, a member of the Automotive Feeding Industries Division from the Engineering Industries Chamber of the Federation of Egyptian Industries, said that the automotive feeder industries need state incentives, such as exemptions for input equipment, so investors can develop and improve their efficiency during the coming period.
Furthermore, Khalil pointed out that the industry needs to expand by relying on three main axes: companies directing products to the local market; unifying market standards, and banning imports of low quality products in order to protect Egyptian production.
He explained that finding a unified standard for the automotive feeder industries will in turn protect the competition between local and foreign products, rather than competing with products of inferior quality which may be cheaper.
The Egyptian Organisation for Standards and Quality issued a prerequisite for about 20 products from the feeding industries six year ago, but it was not implemented nor activated. The list of products includes bulbs, tires, and other products, he pointed out.
As for the second axis, it includes companies targeting exports through providing incentives for enterprises to boost exports, and to prepare market studies where Egyptian products can compete, in addition to facilitating the entry of Egyptian products into foreign markets through trade agreements, he explained.
Regarding directing companies' production towards the local market, the third axis is to be relied upon, Khalil said, further highlighting the importance of protecting local products from the fierce competition from imported products, as well as accelerating the launch of the automotive industry's strategy in order to stimulate companies to invest in the sector.
The most prominent automotive parts that are not yet manufactured domestically are the engines and gearboxes, which only the parent company productises.”Egypt can increase the ratio of local components to manufacture Egyptian cars,” he elaborated.
Many other parts are manufactured domestically such as brake pads, seats, and batteries, in addition to the metal parts of the chassis, Khalil declared.
Moreover, Khalil remarked thatt his company, Fimco, produces plastic paints from 1,500-2,000 cars per month, with plans to expand further in the coming period. The company is the first to specialise in automotive plastic paints as of 20 years ago. Fimco relies on domestic supply, and provides products to all automotive companies in Egypt. It also manufactures metal parts in car bodies and chassis.
Bishoy Teriak, deputy chairperson of El Teriak Engineering Industries, said that the high rate of manufacturing in light transport and the bus industry have contributed to the increased demand for products from local feeding industries and spare parts companies.
Teriak noted that companies are awaiting the activation of the automotive industry strategy in order to infuse more investments.
Moreover, he explained that expansion plans for companies and the increasing investments depend on the volume of demand as well as the entry of new companies to manufacture or assemble cars, where there are currently over 500 registered feeding industries companies.
The local components ratio in General Motors' cars reached 70% this year, which is the largest ratio for a local car, he pointed out, noting that a General Motors car only needs engines from abroad, while the rest is supplied domestically.
Additionally, he stated that the Kia will be manufactured in Egypt for the very first time during next year, in addition to two new models that will be added in the coming period based on market needs.
Over and above, he indicated that El Teriak company manufactures radiators and car air conditioners, pointing out that local companies rely on direct supply to carmakers, but in the local market, these companies face fierce competition from products imported from China and East Asian countries, especially in view of low their prices despite their poor quality, which is still sought by some consumers.
The low quality products in the market damage local industry, which is a problem facing all automotive feeding industries, he stressed.
Likewise, Teriak disclosed that the entry of major automotive companies will contribute to increased production capacity and reduce the production cost. He also pointed out that the future of the automotive industry is still uncertain, due to the delay in the issuance of the automotive industry strategy, given the difficulty of competing with European products due to them being exempted from customs.
Ehab Ibrahim, deputy head of the Automotive Feeding Industries Division, said that companies are waiting for the automotive industry strategy, as feeder industries and the automotive industry are two sides of a the same coin which should operate at the same time.
He imparted that the large corporations will come to Egypt if there is a healthy feeding industry.
Egyptian companies are able to produce a large part of the automotive production input, where the ratio of local components increased to 60%, affirmed Ibrahim.
Furthermore, he stressed the importance of granting incentives to models manufactured in Egypt, and increasing these incentives according to the percentage of local component in the products, in addition to establishing test laboratories for feeding industries in order to reduce the manufacturing expenses instead of relying on laboratories abroad at high prices.
Moreover, Ibrahim underscored the importance of giving incentives for exports, and to benefit from the experiences of Tunisia, Morocco, and South Africa in stimulating companies to increase new investments into the sector, and transom companies in order to enlarge the proportion of local components in their products as well as establishing integrated industrial cities for this industry.