GB Auto aims to sell 5,000 Arrizo cars, introduce new models in 2020

Consumer is key in digital transformation process; most important preparations are raising awareness and e-signature: Valavanis

GB Auto Group is a leading regional automotive player and non-bank financial services provider in Egypt. The group's operations are split into core automotive (GB Auto & auto related) and high-margin financing businesses (GB Capital).
In an interview with the Daily News Egypt, Andre Valavanis, Investor Relations AVP, outlined his vision for the future of the company's activities, both in the automotive and non-banking financial services sectors.
GB Auto has a financial arm that serves its core business while competing with other non-bank financial service providers. At the forefront of this strategy is GB Capital, which today oversees the operations of the group's five non-bank financial service providers.
How does GB Auto plan to utilise financial technology to develop its future non-bank financial service in these companies?
GB Capital is a leading non-bank financial services provider in Egypt and targets further growth through expanding its existing businesses and adding new services. It is expected to activate the mortgage activity during the last quarter of this year, as well as launch a new “electronic wallet" soon.
Regarding the opportunities for GB Auto to benefit from financial technology; the state is moving toward digital transformation to enhance growth opportunities of non-banking activities. I believe that financial technology and digital transformation will indirectly support the future of the non-banking financial sector, where the major and direct impact in the process of digital transformation will be linked to consumer acceptance and the use of financial technology. Therefore, the beginning should be to educate consumers about financial technology as well as provide the appropriate infrastructure and legislation to expand financial technology, especially the process of an electronic signature and its strength before the Egyptian courts to ensure the protection of the rights of both companies and users. The success of the use of financial technology must be linked to a secure electronic signature process as well as the need to raise consumer awareness about the shift towards industry.
The revenues of non-bank financial activities represented in GB Capital contributed about 17% of GB Auto's revenues during the second quarter (Q2) of this year. The financing portfolio stood at EGP 8.6bn at the end of June, almost unchanged, given the implementation of the securitisation transaction of GB Financial Leasing worth EGP 767m in June. If the value of this deal is excluded, the financing portfolio would have risen by 37.7% on yearly basis to EGP 9.4bn by the end of June.
What is the expansion strategy of the company during 2020 in the field of cars and its services?
The company aims to sell 5,000 Chery Arrizo vehicles during 2020. The locally assembled Arrizo 5 is witnessing good demand. The company also aims to introduce new models next year expand and invest in the automotive sector in Egypt and meet the needs of Egyptian customers, who are looking for practical cars with top features at a competitive price and good after-sales services.
GB Auto remains the passenger car market share leader in Q2 of 2019 even after discontinuing the best-selling car, Verna. GB Auto is expected to increase its market share after the introduction of the Arrizo 5 CKD model moving forward.
What is the company's current market share in the automotive market?
GB Auto has a market share of 20.5% in July YTD is constantly striving to enhance this share through good competitive products.
What are the main challenges facing the company and automotive industry?
GB Auto suffers from turbulence and price instability in the Egyptian automotive ,sector started by last year end, , when demand for passenger cars fell. The market is currently suffering lower than expected demand, in addition to the unfair competition due to the customs exemptions on European, Turkish, and Moroccan cars at the expense of the locally assembled models and cars imported from other countries.
Asian cars carry custom duties of 40% well as the components used in assembling therefore the company is forced to put those cars at high prices compared to imported European cars which are exempted from customs. This is likely to push demand in the benefit of European cars and has shifted the demand away from the locally assembled models.
Therefore, it is the government's responsibility to restructure the car market and provide equal opportunities for all the companies in the market to support its stability and make best use of state resources of foreign exchange (FX) along with customs duties. The state should also protect the domestic assembling activities.
What about the company's regional sales, and the challenges it faces?
GB Auto continues to show an impressive performance on the regional front. Regional operations generated revenues of EGP 1.784bn in Q2 of 2019, more than doubling from the EGP 699m recorded a year previously, as demand continues to grow as the country security and political situation continues to improve. Revenues more than doubled year-on-year (y-o-y) in the first half (H1) of 2019 to reach EGP 3.4bn.
Is the company considering manufacturing electric cars in the future?
GB Auto always strives to keep pace with the developments of the automotive market and provide new competitive products, however electric cars are not in the company's plan now. Egyptian market is not ready to deal with such type of cars, since they need services that are not accessible in in Egypt such as charging stations. Egyptian residential areas still lack enough parking spaces, the infrastructure is not yet prepared to demand these cars. This would take a long time to process. We also have to consider other matters, such as the appropriate disposition of the batteries after they expire in seven years without damaging the environment.
Up to now, traditional cars are prevalent globally despite the technological development in many European countries and the spread of awareness and culture among consumers of these cars, but the rate of growth in demand for them is limited. At the moment, the market can adopt Hybrid cars, given its custom duties fall to 0% similar to the EU cars, which will save a lot of fuel consumption to the country.