Despite initial hopes that a 2004 trade agreement between many Middle East and North African countries would play a role in reducing car prices around the country, the results have fallen far short of expectation.
The Agadir Agreement was signed in February 2004 by Egypt, Jordan, Morocco, and Tunisia with the aim of establishing a free trade area between those countries.
Agadir was part of a long process that began in the mid-1990s to establish and strengthen a union of Mediterranean states that would act more cooperatively, both politically and economically.
Essentially, Agadir, like so many other trade agreements Egypt has with countries around the world, would reduce or eliminate tariffs on goods traded between the four countries.
In addition to strengthening ties, this reduction or elimination of the tariff would make each country’s exports more appealing within the free trade zone.
The Agadir Agreement was implemented between 2004 and 2006 with a slow graduated tariff reduction.
Areas that the agreement focused on included manufactured goods, agricultural products, and commercial services.
The purpose of Agadir’s establishment, the founding charter said, was for “the development of economic and commercial cooperation between them, and in support of equality, and in hope of widening the base of shared benefits and advantages in all fields, and the economic unification between them, and supporting the development and advancement of their people.
Expectations, immediately following the establishment of the agreement, were that the prices of cars manufactured in Morocco would decline in the Egyptian market.
Car company Renault builds its Logan model in Morocco, but indications are that despite a 40 percent decline in tariffs, the price on the Egyptian market has yet to slide significantly.
The Logan stands to be a popular model in Egypt because it’s a four-door sedan with very low carbon emissions, a fad that is just beginning to take hold in Egypt. It’s also, as sedans go, a large car, which plays to another trend in the Egyptian automotive market.
There’s reportedly a six-month waiting list for the car.
“Renault Logan. It is not assembled in Egypt and it meets the requirement of having 40 percent inputs of local origin, said Nour Farrag, an auto expert and associate at investment bank EFG Hermes, mentioning that products must not just be assembled in Agadir countries, but the inputs must be two-fifths local.
But Renault dealers in Cairo, who refused to speak on the record because of company policy, noted that the price of the car hadn’t come down much.
The full package manual sedan Logan model is selling for LE 66,900.
One car sales representative told Daily News Egypt that the consumers would not get to see the benefit of the agreement, and that the price of the car will not decline significantly.
Farrag, too, confirmed hearing that prices had yet to come down.
Still, compared to other cars of the same genre, many see it as decently priced.
With Renault being a popular brand in Egypt, it is only the Logan, not any of the myriad of other models, that qualifies for the tariff break.
“It’s not all the Renaults because we have a local agent that sells others, said Farrag.
It is unclear why, exactly, Renault has yet to reduce prices in lockstep with the tariff reduction.
“On prices I would say based on anecdotal evidence, several car dealers have cut prices early in 2009 to spur demand, said Farrag.
Auto sales slumped in the second half of 2008, with the used vehicle industry and the auto repair-related industry growing instead.
The Agadir agreement is already having a wide impact on the trade patterns economies of the four participating countries, but the auto industry has not seen the same sort of progress given that many of the cars sold in Egypt are either locally manufactured or imported from Europe, to where the trade agreement does not extend.
But the industry in Egypt seems to have bottomed out and dealers’ efforts to reduce prices and encourage growth may start, in the coming moths, to pay off and bring about an industry comeback.