‘Overpricing’ leads to sales decline in Egypt’s automotive market

Zamzam Mostafa
7 Min Read
Montaser Zaytoun

The most recent period has witnessed the launch of several new and eye-catching vehicle models, which has prompted a commensurate surge in sales.

Due to the increasing demand from consumers, merchants have taken to increasing prices causing the “overpricing” phenomenon. This has stormed car sales again due to the ambitions of some dealers.

Overpricing is the act of setting a price over the actual value of the product.

Ahmed Samir Farag, Acting Head of Egypt’s Consumer Protection Agency (CPA), said that the agency’s instructions regarding the in-dealership or electronic publication of prices and car specifications by dealers and distributors aim to support customer rights. This includes the customer’s right to know the prices of vehicles with no hidden costs, or without the costs being concealed.

Farag added that the overpricing phenomenon during this period comes against the procedures that the CPA is pursuing. He said that whoever files a complaint against the merchant over an increase in prices can file a lawsuit against the dealer.

The consumer should, however, be able to prove and confirm this increase in price through an invoice, bank account statement, or any other form of explicit and clear evidence.

He added that whoever violates these instructions and raises the prices for the consumer, will expose themselves to a lawsuit for fraud and deception.

Farag said that these instructions are in the consumer’s interests, allowing them to gain access to the full information about the car, thus making it easier to make decisions.

He confirmed that the CPA has a media observatory to counter all misleading ads that are broadcast through various media platforms, whether through television channels, newspapers, or social media sites. He also pointed out that the agency has detected many misleading ads.

Farag said that the CPA requires the merchant, distributor, and agent to write fixed prices at exhibitions and on social media sites. This requirement also extends to purchase invoices. Should this not occur, car dealerships shall be liable for compensation amounting to EGP 1m.

He also emphasised the need for consumers to communicate with the CPA to help counter commercial fraud and hold law-breakers accountable. Consumers can contact the agency through its numbers and via its social media accounts.

Ahmed El-Ghorab, Sales Director at B Auto for Car Trade, said that the CPA’s instructions on over-pricing and the additional charges placed on vehicle prices, have been made without studying the market situation during this period.

He added that many dealers and distributors offer the car at a price, and upon purchase, the price is raised due to the lack of supply, or a desire to make a profit. However, this price is not included in the final invoice, which reflects tax evasion.

El-Ghorab emphasised the need for the customer to obtain an invoice for the price of the car. This means that if the price of the car as advertised by the company is EGP 200,000 and the distributor sells it for EGP 205,000, then the customer must only pay the former and receive an invoice that states this amount.

There are also distributors who do not put prices on cars, but advertise only the instalment schemes to attract customers.

El-Ghorab pointed out that many distributors are burning prices in the auto market. By doing so, they are looking to compensate for the difference in bank transactions and insurance operations that they have to pay when the customer pays in instalments. This in turn negatively affects merchants who do not rely on banking transactions.

He said that vehicles are a commodity whose prices are not governed, and that this is closer to open free trade. This applies to all commodities, such as plane tickets. If the price of a car is overpriced, clients should consider other options.

Moreover, Montaser Zaytoun, a board member of the Egyptian Automotive Dealers Association, revealed that the phenomenon of over-pricing during this period works against the consumer. He pointed out that the new Skoda Octavia 2021 model received a large price increase from the distributors.

Zaytoun said that many distributors impose a large increase on vehicles as a result of the lack of supply and the increase in demand for cars. This particularly affects cars that receive great interest from consumers, including the Skoda Octavia, which has been overpriced by EGP 25,000.

He added that many distributors hide the price increase from the media and lie to customers, with the increase affecting consumers who are receiving cars.

Zaytoun called on agents working in the Egyptian market to confront distributors who impose a price increase on the official prices announced by the agent.

Bassem Al-Rowad, a Skoda distributor, confirmed that the market suffers from a shortage in vehicle supply, which leads distributors to impose a price increase on cars to reduce the demand.

He said that new shipments may be received in the coming period, which could bring prices down to their official rates again.

Mohamed Salem, a car distributor, criticised the existence of over-pricing during the recent period, and noted the stability of prices according to those announced by the agent. He also said that the price increase was placed on the first batches of cars only before prices went down.

He added that vehicles are booked at a specific price, and the receipt takes place up to three weeks according to the prices that were agreed upon at the time of reservation. The price increase is never actually applied.

A Skoda car distributor, who spoke on condition of anonymity, said that there is a price increase of EGP 25,000 for the 2021 Skoda Octavia i8, ​​due to the global limited supply of cars.

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