FEI presents proposal for automotive industry strategy’s principles

Daily News Egypt
6 Min Read

By Ahmed Amer

The Federation of Egyptian Industries (FEI) is presenting on Tuesday a proposal for a strategy for automotive industries to the Ministry of Industry and Foreign Trade.

The transportation division, on the other hand, formed a committee in cooperation with the Industrial Development Authority (IDA) to place the mechanisms and new investment incentives for the automotive industry.

Samir Allam, member of the board of the transportation division and General Manager of Egyptian British Automotive Manufacturing (EBAM) said the Chamber of Engineering Industries at the FEI will present the proposal to Minister of Industry Mounir Fakhry Abdel Nour. It will present the principles agreed upon by the automotive manufacturers during the meetings held three weeks ago.

Allam added that the transportation division formed a committee with the IDA to discuss the mechanisms for implementing the automotive manufacturing strategy.

He declared that the division suggested offering 22 new car components to be produced locally (on the condition that they had not been manufactured in Egypt before), in order to increase local production. According to Allam, the proposal aims at giving these components percentages that would be added to the local components percentage. This would give the factory a chance to increase its local components and be exempt from the added tax proposed to be imposed on cars.

Allam said that the division appointed him to be representative in front of the IDA to add incentive percentages for the new 22 components, in order to encourage the increase in the local component percentage, which is now at 45% and is planned to reach 54% in the next 15 years.

Amr El-Kady, Executive Director of the Arab American Vehicles Company (AAV), Jeep factory in Egypt, told Daily News Egypt that AAV and Chrysler refuse the proposed strategy.

El-Kady affirmed that he is not against increasing the percentage of local component. However, some car components require mega investments, while revenues from the strategy would not be enough to enter these investments. In this case, it will be a burden on the factory. El-Kady added that if AAV entered the transmission industry, the components industry will not be equivalent to the revenues from deducting the additional tax that would be imposed on the local factory by the government.

El-Kady demanded reconsidering how to incentivise manufacturers or the investors to increase the percentage of the local components by differentiating between car components. He pointed out that the strategy in its current form treats investments in manufacturing car transmission and manufacturing mirrors and tires equally.

A number of car manufacturers, in cooperation with the Chamber of Engineering Industries, held a meeting and put together a memorandum that includes strategic goals for the future of automotive industries. The strategy, which was prepared by Loic Company, focuses on preserving competition in the automotive industry, reducing the customs tariff and modifying the sales tax, in addition to deepening and developing the automotive industry. It would also give vehicle manufacturers the privilege of exemption from sales taxes in accordance with his ability to deepen the manufacturing. Also, it would raise the minimum percentage of local components from the current 45% to 54% in 15 years.  The minimum percentage of the local components could be made up for through exporting.

The suggestions, which the manufacturers agreed to put forth to the minister, included designing a programme to raising demand on cars by giving car owners an incentive to replace their old cars. It also included applying the same programme to microbuses and taxi vehicles.

The suggestions pointed to the necessity of agreement between the government and the banking sector on facilitating car loans, in addition to policies that reduce the cost of financing.

Raouf Ghabbour, Chairman of the Board of Directors and Chief Executive Officer at Ghabbour Auto, said that the purpose of the meeting was to reach an agreement between all automotive manufacturers in Egypt regarding the principles of the automotive industry strategy. He pointed out that they only designated the principles of the strategy and not the model of the strategy.

Among the attendees of that meeting were Raouf Ghabbour, and Bavarian Auto Group Chairman Farid El-Tobgy. The meeting was also attended by General Motors CEO in Egypt and North Africa Tarek Ata, FEI Board member Ahmed Fekry Abdel Wahab, and Chairman of the Egyptian German Automotive Company Karim Sami Saad. Head of the Vehicles and Other Transport Equipment Division at the FEI Adel Bedeir, board member of the Chamber of Engineering Industries Abdel Moneim El-Kady, and Chairman of Egyptian Auto Feeders Association (EAFA) Ali Tawfik also attended the meeting.

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