Recession continues to dominate car market

Recent sales plunge forced companies to reduce traditional marketing campaigns in favour of online marketing campaigns, says Auto Group

The automotive sector, like other economic sectors in Egypt, is still suffering from recession due to the ongoing novel coronavirus (COVID-19) pandemic, according to Alaa ElSaba, member of the Federation of Egyptian Chambers of Commerce's (FEDCOC) Automotive Division and Chairperson of ElSaba Automotive.
ElSaba added that car showrooms, however, are the most affected by the current conditions due to their dependence on evening work. He noted that evenings tend to be the most appropriate time for customers to purchase a car.
He further added that his company has yet to reduce its expenditures, despite the losses it incurred until now in the hope of economic recovery. He stressed that no employees are to be laid off, and they will not have their wages cut, despite the company's increased expenditure in providing sterilisation and protection against the virus.
He explained that the prevailing circumstances have greatly affected consumer purchasing decisions, with many also facing liquidity concerns due to the ongoing uncertainties of the situation.
"Consumers are more focused on health priorities and not buying a car, although there are indications that car prices may be driven up by the depreciation of the local currency and the supply shortage," he said.
ElSaba said the current situation has forced companies to change their marketing plans, shifting to electronic channels for increased outreach. This has been an especially important shift as more potential consumers are working from home, and Internet usage has gone up across the country.
He pointed out that the scarcity of imported cars due to reduced imports have forced agents to alter the logistics of distributing vehicles to distributors, and how they do so. This has particularly been the case with domestically produced vehicles, or those that have been assembled in Egypt.
ElSaba refuted claims of monopoly activities by some dealerships, saying that they may give some distributors more units to create the impression that a monopoly is in place. He noted, however, that this only happens when many distributors refuse to take their quotas, with dealerships then having to find the strongest distributor to dispose their stocks.
Osama Mahmoud
He added that vehicle overpricing is caused by the consumer behaviours, rather than monopoly activities, adding that if consumers refused excessive prices, traders will be forced to get prices down.
Osama Mahmoud, Director of Marketing at Auto Group, said that his company is operating at full capacity and has not closed any of its branches.
The company has ensured it has put in place precautionary measures, including the health and sterilisation standards announced by the Ministries of Health and Social Solidarity. These efforts have been put in place both for clients and employees, with Mahmoud stressing that no lay-offs or wage cuts taking place.
Mahmoud noted that the recent plunge in sales has forced many companies to reduce their traditional marketing campaigns, which normally take up a large part of company expenditure. Instead, with many consumers now spending more time online, companies have considered it a shrewd move to turn to electronic marketing channels marketing instead.
He pointed out that the auto market is currently seeing a vastly reduced supply of cars due to the closure of many vehicle production factories.
Omar Balbaa, Head of the Automotive Division at FEDCOC, emphasised the auto market is seeing an unusual recession due to the global coronavirus pandemic. He also stressed that this recession will not end unless there a vaccine against the virus is developed.
Balbaa added that many customers have been hesitant to make purchasing decisions, with fears for the future on the back of the virus cutting consumer purchasing power by as much as 50%.
Omar Balbaa
He pointed out that FEDCOC's Automotive Division agrees with the state's enforcement of precautionary measures, and supports the response to public requests to preserve the health of citizens.
Balbaa also said that the auto sector's economic stagnation is no different from other sectors that have been affected by the reduction in working hours. He added that agents have not forced distributors to receive their quotas, since dealerships themselves are also suffering from low stocks.
Montasser Zaytoun, Chairperson of Zaytoun Auto Mall, said that lowering expenses would be difficult due to the need for essential marketing expenditures, especially given the current market recession. Moreover, although automotive companies are unable to lay off employees, some have cut wages and instead resorted to offering commissions on vehicle sales.
Zaytoun pointed out that automotive companies have seen expenses rise as they spend more on disinfection and other precautionary measures.
He said that the market is currently suffering a shortage in vehicle supply, as global factories have lowered production due to the ongoing health crisis. He noted that the sole distributor phenomenon is still present, but has been eased in certain brands due to low supply.