Customs dollar brings back the auto sector to recession

Ahmed Amer
10 Min Read

Earlier this month, there had been car price cuts after a major decline in sales and a state of recession.

The discounts were supported by the decline of the customs dollar rate in the first half of March; however, this quickly changed after the Ministry of Finance announced increasing the customs dollar rate again, leading auto companies to in turn increase their prices, bringing back a state of recession to the market.

With the fluctuations, many questions emerge, including one main question: can the market deal with the recession and the lack of currency as well as the accumulated stock?

A source—who preferred anonymity—told Daily News Egypt that banks have been tightening the processes of documentary credits for car importing for over four months, whereas car companies are still struggling to provide foreign currency.

The source stressed that companies are currently selling their stock, which accumulated over the past period due to the decline in sales. Over the upcoming period, pricing will be done according to the estimation of importing value after selling the stock.

The source expects car prices to hike during the upcoming months after companies had to import 2018 models, which will push companies towards a price increase that will be the largest in the history of the sector, resulting in new waves of recession.

He explained that companies will issue discount offers on the stock of the car models of 2016 and 2017 during the second half of this year. They will compensate the lack in profit margin by increasing the prices of 2018 models.

The source predicted that the sales of the car market will witness a great decline of nearly 40% in 2017 compared to the sales of 2016, after the customs dollar rate increased again. Reports indicate that the dollar value in fiscal year (FY) 2017/2018 will continue to increase.

Khaled Saeed, the chairperson of Brilliance in Egypt and a member of the Egyptian Automobile Manufacturers Association (EAMA), said that the sales of the market have declined by 40% over the past two months, compared to the same period in 2016, due to consumers abstaining from buying cars after the recent wave of price increases that lasted for the past three months. He expected the sales of 2017 to close at a rate of decline ranging between 25% and 30%.

The rise of the customs dollar puts the sector in a state of recession as a result of the increased car prices.

Alaa El-Saba, chairperson of El-Saba Automotive, said that traders and agents have reduced their prices in order to create movement in the market, with the dollar crisis still present. The lack of dollars has caused an increase in prices.

El-Saba added that traders have reduced their profit margin after their stock accumulated, while the dollar price continues to increase against the pound by 10%.  This means that traders must increase their prices by the same amount.

A large number of car companies have reviewed the price cut of their cars that they offered to consumers early in March, most prominently Kia, Hyundai, Mazda, Al Rawas, and Nissan.

Kia announced the prices of its models in the middle of this month, where the company went back to increasing its prices after previously offering a discount ranging between EGP 20,000 and EGP 40,000.

The Kia Picanto’s prices reached EGP 230,000 for its first class, and EGP 245,000 for the second class. The Rio’s prices ranged between EGP 315,000 and EGP 346,000, the Cerato between EGP 315,000 and EGP 390,000, and the Carens was priced at EGP 455,000 for the first class.

Kia Soul’s prices ranges between EGP 380,000 and EGP 430,000, the Ceed between EGP 360,000 and EGP 400,000, and the Sportage between EGP 470,000 and EGP 660,000.

Al Rawas, the former agent of Mitsubishi in Egypt and the current agent of Mitsubishi Gulf cars, has increased its prices starting from today.

The company announced through its Facebook page earlier this month that it will be making discounts on its models. The discounts lasted until 21 March and then went back to increasing due to the customs dollar rate increase.

GB Auto, the agent of Mazda in Egypt, has announced the end of its offers on Mazda 3 models.

Car companies had started launching discounts with the aim of moving the static market. The offers involved most of the Korean, Japanese, and American brands, while there were no offers on European brands.

One of the distributors of Nissan announced that Nissan Egypt launched discounts of 2.5% and 3.5% earlier in March on the prices of its cars.

He added the company has decreased the price of the New Sunny by about EGP 5,000, which is 2.5% of its official price. The prices of the Qashqai, Centra, and Juke Platinum models were reduced by EGP 10,000. The offer will end by the end of this month or when the available stocks with agents and traders run out.

Kia reduced the price of the Carens by EGP 30,000 earlier this month, making its price reach EGP 444,900. It reduced EGP 43,000 from the Cerato, taking its price to EGP 299,900, and it reduced EGP 28,000 from the Rio, taking it to EGP 304,900.

The Picanto’s price was reduced by EGP 23,000, making it EGP 222,000, while the Soul’s price was reduced by EGP 30,000, recording EGP 370,000. The Sportage’s price has decreased by EGP 40,000, recording EGP 450,000.

After the flotation decision issued by the Central Bank of Egypt (CBE) in November, the sales of companies have decreased by 15%, with sales of 1,405 units compared to 1,650 units sold in November 2015.

The decline rate reached 40% in December, with 1,000 sold units compared to 1,670 units sold in December 2015.

Chevrolet has kept its prices at the same rates without changes, except for the Lanos, whose price was decreased by EGP 4,250.

GB Ghabour announced the new prices and discounts on its Korean brand, Hyundai.

Lists show that the prices of the Hyundai i10 range between EGP 149,000 and EGP 165,000. The Grand i10 ranges between EGP 207,500 and EGP 223,000, with discounts of nearly EGP 35,000.

The prices of Creta range between EGP 355,000 and EGP 412,000. Tuscan came with discounts of EGP 15,000, with prices ranging between EGP 490,000 and EGP 551,000.

The top category of the Accent reached the price of EGP 258,000. Its first class starts at EGP 235,000. The Solaris was priced to range between EGP 242,000 and EGP 257,000. The price of the i30 Facelift ranges between EGP 314,000 and EGP 385,000, with a discount of 10%—worth EGP 35,000.

The prices of the Elantra ranged between EGP 220,000 and EGP 367,000, with discounts of EGP 55,000, according to the new prices of Ghabour Auto. The Verna has recorded EGP 145,000 for the first class, and EGP 190,00 for the top class.

Chery has made discounts of EGP 25,000 on its Envy model, making its price EGP 144,500. A discount by Tiggo made its official price reach EGP 217,000. The official price of the Geely Emgrand 7 reached EGP 155,000 after discounts of EGP 25,000.

Mazda has made discounts on the Mazda 3, making its price reach EGP 291,000 with a EGP 60,000 discount. The discount on the Mazda 2 reached EGP 18,000, making the price EGP 289,000.

Subaru has reduced the price of its cars by EGP 50,000, where the price of its first category is EGP 400,000, and EGP 490,000 for the top category which was sold for EGP 540,000 before discounts.

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