CAIRO: Automakers in Egypt should be seeing a boost in numbers soon due to the implementation of a series of regulations being carried out in three phases.
With one of the numbers of traffic accidents worldwide, the government has attributed up to 40 percent of automobile accidents to technical problems from sub-par parts entering the market.
Lax restrictions in the past allowed many parts of this quality to enter the country, but the Ministry of Trade and Industry announced that higher standards would be imposed in the coming years.
Meanwhile, the trailer replacement program is expected to boost manufacturing and sales — much like the taxi replacement program did over the past year.
“The news reflects the fact that the government is keen on executing the long expected ban on draw-bar trailers in Egypt, in order to improve the deteriorating safety of road transport,” investment bank Beltone Financial said in a report.
According to a statement by Beltone, the Ministries of Finance, Transport and Trade and Industry will be collaborating with a number of local banks, such as Banque Du Caire, Alex Bank (previously Bank of Alexandria), and Nasser Bank to finance what is being called the draw-bar trailer replacement program.
Through the program, trailer owners or owners of old trucks with trailers will be permitted to purchase new trailers, or receive modifications, from local manufacturers to import them free of sales tax and import tariffs.
“They can apply for the project to replace either the truck with a new truck head, or modify it to a truck head. For the old trailers, they have the option to replace with a new elongated trailer to be fixed on the truck head or modify it (modification includes a new chassis),” explained Mohamed Youssef, assistant deputy minister at the Ministry of Finance.
Owners are classified as either transportation companies who own more than one truck or individuals, he added.
The banks will be providing five-year loans with an accompanying interest rate of 6.26 percent and the recipients in the program will be granted up to LE 100,000 per trailer with benefits comprising of tax and custom exemptions.
Youssef explained that the participants importing parts for the truck heads will be exempted from the 5 percent customs duty and the 10 percent sales tax is waived and paid on their behalf since there is no exemption.
He stated that the average subsidy is estimated at about LE 100,000, but that cost differs from case to case.
Modifications of the trailer are estimated to range from LE 70,000 to LE 190,000 and new trailers ranging from LE 120,000 to LE 200,000.
Truck modifications are anticipated to vary from LE 30,000 to LE 50,000 and new truck heads ranging from LE 370,000 to LE 600,000 while used truck heads running anywhere from LE 200,000 to LE 400,000.
While August 2011 has been set as the registration deadline for trailer owners, the benefits are set to expire in August 2012 in hopes of giving beneficiaries ample time to redeem the assistance provided.
Currently, only phase one has been started, which commenced about a week ago after the signing of the protocol.
“Phase one only includes replacing trucks in the Greater Cairo region which includes Cairo, Giza, Sixth of October, Helwan and Qaliubiya,” said Youssef.
This program is expected to only modify about 21,000 units and replace an estimated 14,000 units that were manufactured before 1990.
GB Auto has been chosen as the company to receive the contract from the government to oversee the project that is targeting around 35,000 trailers in Egypt.
According to Beltone Financial, the average revenue per unit for GB Auto would be an estimated LE 60,000, which would essentially translate into a possible revenue stream of LE 630 million over the next two years.
GB Auto is expected to capture a market share of an estimated 30 to 35 percent.
While the program seems to be a step in the right direction at improving safety on the roads, the government is also looking at implementing a long discussed ban on draw-bar trailers in order to improve the declining safety of road transport.