Removing European car import customs tariffs causes inertia in Egypt's used vehicle market

First week of 2019: traders maintain prices, customers wait for reductions

It is unusually quiet in the Egyptian used car market as hundreds of vehicles accumulated in the allocated areas with their owners and traders sitting beside them. Some are desperate to get rid of their old vehicles and others are frustrated as the number of buyers severely decline.
This was the case of the Friday market for used cars in the Nasr City, which is the first market day after the Egyptian-European Association Agreement came into effect, according to which Egypt removes all custom tariffs on cars imported from EU countries.
On 1 January, several European car dealers in Egypt announced a decline in prices of different car brands, such as Skoda, Opel, Peugeot, Ford, and others. This seems to have reflected negatively on the used-car market, which has been emptied of buyers who are now waiting to see if the new prices of European cars will hopefully result in a decline of used car prices.
Used cars offered for sale decline to 25%
Ibrahim Ismail, executive director of the Used Car Market in the Tenth Neighbourhood of the Nasr City, said that linking the used car prices to new ones is not reasonable.
He stressed that a period of stagnation has been experienced in the used car market since November 2018, especially after the announcement of the new Egyptian-European agreement stating the elimination of custom tariffs on European cars. He was puzzled with the impact on the used car market, which includes a few European brands yet was actually dominated by Korean models.
Ismail said the market usually receives over 3,000 used cars every Friday, but that number gradually decreased since last November reaching its lowest level last Friday of only 700 cars, less than 25% of the usual volume.
He added that the actual impact of lifting customs on European cars will not appear before 20 days in January, hoping that new car prices be stabilised so that the used car market can be revived again this month.
Hossam Maghrabi, a car dealer, said that if new car prices declined, the used car prices will follow, as traders will tend to buy new cars.
“I hope the prices go down, so sales will improve, and we all walk out winners,” he said.
European cars are not that common among Egyptians
Sayed Abu Salah, a used car trader, said that the abolition of custom tariffs on European cars will not affect the used car market, pointing out that these new European cars will still be pricey even after the new decisions, and that its customers are from a very specific social segment, while most people prefer the Korean models for their moderate prices.
He added that the recession that hit the market began after the announcement of the final implementation of the Egyptian-European agreement, which prompted many customers to wait for the new prices, causing a stagnation in car trading.
Abu Salah noted that the used car market will need at least two months to recover.
Used cars are expensive and European cars are more available
Hany Ahmed, a used car owner, said that he regularly comes to the market to follow up on the prices of used cars, noting that he has postponed selling his car until the prices stabilise.
He added that if the prices of European cars declined, he will prefer buying a European car to a Korean one, even though he believes the drop in prices gives a chance for Egyptians to own European cars.
Ezzat Mohamed, a customer in the used car market, said that he prefers Korean cars for their spare parts' low prices.
He said that the market is currently in a state of recession, adding that the prices of used cars are unreasonably high and dealers have no intention to reduce them.
Hyundai Verna is most demanded
Ahmed Eissa, a used car dealer, said that eliminating customs on European cars had the most significant impact on the prices of cars, noting that the decision only affects only those interested in European cars, which are a minority.
As for the most demanded cars, these are Hyundai, Kia, and Korean cars in general. As for the most sold car in the market, it is Hyundai Verna.
He added that cars within the price range of EGP 100,000 – 120,000 have the highest demand.
Chinese cars becoming popular for their low prices
One of the car dealers said that Chinese cars are becoming popular in the market due to their suitable prices. He believes they outperform Korean and Japanese cars because of their low-price accessories and spare parts. "I have been working in the market of Chinese cars since 2006 and it has been all good," he said.
"Egyptians prefer famous brands. We now only trade 10 car brands." he added.
He stressed that most Egyptians do not buy European cars given their high prices, unlike the market of used cars where the most expensive car would cost EGP 300,000, which suits middle class Egyptians.