“No one can set profit limit for traders, we expect state incentives to encourage local car assembly”: Chairperson of El Saba Automotive

Tamer Farhat
9 Min Read
Alaa El-Saba

At the beginning of 2019, a new campaign has been launched on social media calling on Egyptians to stop buying both new and second-hand vehicles to pressure all dealerships into lowering their prices. The campaign went viral attracting more than 400,000 followers since its beginning on 2 January.

Currently, a new wave of recession would hit the local automotive market in Egypt, not only due to the people’s high interaction with the boycotting campaign, but also due to the lower-than-expected decrease in car prices and the decline of Egyptians’ purchasing power.

Has the ‘Let it Rust’ campaign negatively impacted the car trade?

The market has been stagnant for months and the campaign has nothing to do with the decline in sales. The campaign has no effect on the ground so far, and the decline in sales is due to customers’ expectations of large price declines with the introduction of the last tranche of tariff cuts on European imports. I urge members of the campaign to establish a company and import cars with the prices they offer if they are honest, and we will be the first buyers.

But is there confusion among buyers because of prices?

People have been recently surprised that the prices they see on social networking sites are different from the prices that dealers sell cars for.

This is because of the new procedures in the traffic departments and the absence of a customs clearance certificate revealing the price of the car and the value of taxes and fees imposed upon them.

The reason for the difference in price is that some cars come with a bill that sets the cost of the cheapest models and compares them to the price of the most expensive models to stir controversy and pressure traders to reduce prices.

But there are accusations that traders exaggerate profits?

No one can determine the trader’s profit margin because we are in a free market, and every trader has the right to set their prices. Clients can get a good price when companies compete in a free market.

A trader can sell with 1% profit, or 5%, or even 10% based on their costs. Even if a trader profits EGP 100,000, the state taxes that profits. More importantly, most car traders are honest and transparent and will not evade taxes.

Do we expect car prices to drop again?

There are no signs of new declines in European car prices, which have fallen since the beginning of 2019.

The reduction was in line with expectations before January 2019, which all indicated the same ratio, especially in economic vehicles with a capacity of 1.6 litres, whose prices fell by 3%-7%.

Future buyers waiting for additional declines will not change anything as some expect. The new prices announced by some European brands and dealerships will not change further.

I would recommend that anyone who has made the decision to buy a brand included in the discount to purchase now without hesitation, while those who are still comparing between more than one brand can only wait to see if other cars’ prices will fall.

I expect European car prices to rise gradually if demand increases.

And price cuts do not only rely on tariff reductions, but some agents took advantage of the opportunity to re-price their cars which was disproportionate to the scope of the competition.

Will this affect the prices of used cars?

This will not affect prices of used cars, however it has caused a of stagnation of sorts because of the reluctance of owners to sell due to the foggy outlook of the car market future.

What is the impact of the recent price changes on Asian cars?

Of course, the removal of customs on European cars placed their Asian counterparts in a significant dilema, however I forecast that importers of Asian car companies will demand cuts and benefits so that they can compete with European models.

Will car companies in Egypt be affected by this?

Indeed. The state has to support assembly companies. I anticipate state incentives soon, such as exemptions from some fees or taxes, which are necessary.

Can Egypt manufacture cars in the near future?

We can but it is not easy. For a car to be manufactured in Egypt, about 60% of its components should be local. We can start and follow the footsteps of successful examples, such as Morocco and Renault. The Renault factory produces 400,000 units per year. This is another problem, as in order to manufacture cars in Egypt, production should be over 100,000 units, which would call for huge investments. There were negotiations with Peugeot, but they stalled.

What about the return of Mercedes-Benz to Egypt? Will others follow suit?

The return of Mercedes to Egypt is due to its confidence in investing in Egypt. International companies are not courteous. It would not have taken this decision unless it felt that the obstacles in Egypt were removed.

There have been negotiations at the highest level with these companies and they were often offered incentives, and the hurdles that forced German car companies out of Egypt in 2015 were overcome.

What do we make of Mercedes-Benz’s intention to open a new electric cars’ production line in Egypt?

I think this will be the main activity of Mercedes-Benz in Egypt in the coming period, it will manufacture and export electric cars, which is a great benefit for us.

Is there a great future for electric cars in Egypt?

Electric cars come in two types, one is fully electrified, which is both highly technical and highly priced and needs infrastructure and convincing the customer in terms of savings, and the other uses electricity and gasoline. Convincing clients will be difficult, because the price will be almost double.

The second type of electric cars is the one that uses electricity and gasoline, which is the preferred type, and the price difference will be low.

Has the new Consumer Protection Law implemented its advantages?

The law is good, and I did not object to it, but I had a reservation that I voiced to head of the agency Abdel Rady, on the article allowing the replacement of the commodity after 14 days without giving reasons.

There is also an article in the law which states that a product can be replaced for another with the same condition, which is a contradiction that is difficult to apply in most cases. In the automotive sector, when a client buys a car and drives it for five minutes, it can no longer be returned to its original condition even if nothing was changed. This should be accounted for in the law, even in the licensing.

The situation in foreign countries is different and there is awareness. Customers do not return products unless they believe they do not meet the specifications advertised by the selling company.

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