Car market woes – Business – Al-Ahram Weekly


Car prices around the world are rising due to rising commodity prices amid war in Ukraine as well as shortages of electronic chips that have intensified during the Covid-19 pandemic.

“The global automotive market is witnessing a continuous price increase due to the escalating microchip crisis, declining production at many factories around the world and the protracted crisis in Ukraine,” said Alaa Al. -Sabaa, Member of the Automotive Division of the Cairo Chamber of Commerce.

Al-Sabaa said the semiconductor chip crisis was one of the major factors affecting car production globally, leading to delays in production and in the importation of new car shipments.

In Egypt, passenger car sales fell 20% in April, according to figures released by the Automotive Information Council (AMIC), the industry association to which most dealers report their sales. This follows a 9% drop in March compared to the same month in 2021.

There are many reasons for the decline, as not only have prices surged due to global factors, but also the devaluation of the Egyptian pound in March pushed prices up 17%, and there have been changes in the Central Bank of Egypt (CBE) import rules.

The CBE launched a new initiative in February stipulating the use of letters of credit rather than the simpler and cheaper document collection system that had been used previously.

According to the EPC decision, Egyptian banks are now intermediaries between the importer and the supplier’s bank of the goods, including cars, ensuring that the goods comply with the relevant national specifications and helping suppliers to obtain full of their financial rights as soon as the importers receive their goods.

While these measures are considered important for ensuring quality control of goods and regulation within the banking sector, the new rules have made importing a more complicated and costly procedure.

Al-Sabaa said Egypt imports about 100,000 cars a year at a cost of $1.5 billion, but foreign companies may stop exporting cars to Egypt for at least three months due to delays in sending letters of credit.

According to local media, a number of international car manufacturers have already frozen their exports to Egypt as importers and distributors are no longer able to provide the necessary transfers.

According to financial daily Al-Mal, industry officials said as many as 13 foreign automakers, including Peugeot, Citroen and Fiat, are among those who have started looking for alternatives to the Egyptian market.

Al-Sabaa said there are currently no new cars available for reservation in the local market and the available cars are being sold at prices higher than the official distribution prices due to the shortage.

The Egyptian customs authority also decided last week to increase the customs exchange rate from LE 17.65 to LE 18.65, which will result in a 2-8% increase in the price of imported cars, the less affected being those of European origin because they are exempt from customs and only pay taxes.

To cope with skyrocketing prices and the inability of distributors to deliver cars, the Egyptian Consumer Protection Agency (CPA) ordered agents and distributors to adhere to the vehicle reservation form which guarantees consumer rights.

Anyone who paid the full value of a car before April 12 should receive it without incurring an additional charge, the agency said. Anyone who made a down payment should get back what they paid plus 18% interest, according to CPA guidelines.

The government is taking steps to prepare a national strategy for the automotive industry which will include a number of incentives for car manufacturers in Egypt, especially of electric cars, and the companies that power them and will work to develop a market competitive place.

At the Egypt Can with Industry conference last week, Jihan Saleh, adviser to the prime minister for economic affairs, said that all the ministries concerned with the automotive industry had participated in the development of the national strategy for the localization of the vehicle. automotive industry in Egypt. .

She said Egypt imports cars worth about $4 billion every year, more than the figure given by Al-Sabaa, and said the new strategy aims to reduce imports and increase the volume of exports by attracting investors to support the industry.

“The size of these incentives is related to the volume of investments, as well as local components and added value, in addition to the extent of the use of clean technologies. There is an incentive in the form of duty refunds that are calculated based on these numbers,” Saleh said.

Egypt has 17 car manufacturing and assembly plants which together produce 100,000 cars per year. There are also 300 small factories in animal feed industries and 80 larger ones, some of their products are exported overseas, especially brake discs and some electronic parts.

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