Automotive industry currently economically unviable: MCV President

Daily News Egypt
7 Min Read

Manufacturing cars in small quantities is economically not viable, according to President of Manufacturing Commercial Vehicles Co. (MCV), Karim Ghabbour.

To attract foreign investors to manufacture in Egypt, it is necessary that the factory production be least 200,000-300,000 cars per year. This contradicts the current productivity of local factories that range between 10,000 -30,000 cars per year, which are considered not economical and non-competitive for export quantities.

What do you think of the current situation of the automotive industry in Egypt?

The automotive sector is divided into two parts: import and local. The Egyptian automotive sector sales are much lower than global sales. We need to increase our sales. Overcrowding in the capital created a traffic crisis. Despite the lack of the automotive sales in Egypt, the current road system makes us feel saturated with the number of cars. Improving the situation of the automotive sector in Egypt must include improving public transport as one of the solutions to the elimination of the traffic crisis. Currently, public transport is no longer among the citizen’s options regardless the timing, which lead the citizen to buy a car. In Egypt, 90% of cars only have one person in them. This created the overcrowding crisis which will affect the sector as a whole, unlike most countries in the world, where using the personal car is limited only to weekends versus using public transport during the days of the week.

How does the private sector serve public transportation in the meantime?

The role of the private sector is currently not very well organised. In order to avoid the current status of the authority, we need to create a neutral point to supervise and manage the system instead of the Public Transport Authority. The authority does both “judge and oppose” which creates an unsuitable atmosphere for a stronger entry of the private sector.

What do you think are the most important challenges facing the automotive sector in general and buses in particular?

Making cars in small quantities is not economically viable. If we want to attract foreign investors to manufacture in Egypt, it is necessary for factory production to be at least 200,000-300,000 cars per year. This contradicts with the current productivity of the local factories that ranges between 10,000-30,000 cars per year, which are considered non-economic and non-competitive for export quantities.

What are the ways to lure investors and establish a huge automotive sector?

The government must take action to communicate with international automotive companies and provide benefits to local production including industrial areas near the export port, land for establishing automotive factories, as well as eliminate bureaucracy facing investors and provide tax benefits to the factories so that they would attract investors to the Middle East and North Africa (MENA) region.

How do you see the effects of the trade agreements on the automotive industry?

Public transportation needs subsidy and it is important that subsidy on cars be removed in return for subsidisation on public transportation. This way tax on car sales would be directed to public transportation. The tax can only be applied through customs duty or tax on sales, since customs have declined following the Egyptian-European partnership. The tax has to be an annual tax. I expect that the government will raise the tax on sales, because 10% is a very small amount compared to the rest of the world countries. This will be in return for a decrease in the state’s income from custom duties. We have to also apply an annual tax on cars, which will help apply substitutions for cars, micro-buses and buses; so that the tax would increase annually on cars manufactured more than 20 years ago. MCV exports buses to Europe for more than 10 years, and since we started exporting we did not pay customs on buses to Europe. However, the specifications of quality and price of the product are very high.

What is MCVs’ capacity and capital?

Our capacity is roughly 10,000 buses a year, while the capital is at EGP 500m. MCV is the only company with this capacity in the region.

Does the company have any expansion plans locally or internationally?

We have already increased our capacity from 3,000 buses to 10,000 busses annually, and we plan for sales in 2015 to reach 3,000 sold buses. The company exports to most of the European countries, Asia, Africa, most of the Middle East countries and Australia.

Do you have plans to join the bus rapid transit (BRT) project of the Ministry of Transportation soon?

We will participate in the project, which will help solve the traffic condensation in Cairo. Our company will study the project to be implemented. The project will be hard to execute outside Cairo. The company also has buses that cover transportation between governorates to provide ease of transportation.

How do you see the government’s acts regarding trucks and August deadline given to them for truck modification?

I refuse the government’s decree concerning truck modification during such a short period because it is hard to modify almost 50,000 trucks. This could be done in a period of 10 years. The government has to re-consider this decision.

The real issue is the absence of an annual check-up on trucks, the efficiency of the engine and brakes, in order to give it a certificate of eligibility. Some vehicles have been working for more than 30 years without check-up, and this is the main reason for accidents in Egypt.

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