Will the Supreme Council for Vehicle Manufacturing save the local automotive industry? After the House of Representatives passed legislation last October to establish the Supreme Council for Vehicle Manufacturing — which is mandated with setting up policies for the Egyptian automotive industry, including electric vehicles — the council held its first meeting last month. Industry players Enterprise spoke with are hopeful that the establishment of the council will help achieve the automotive sector’s most pressing goals, including saving factories on the brink of shutting down, attracting new international investors, and encouraging automotive assembly and manufacturing.
Altogether, our sources appear optimistic that 2023 will be a turning point for the industry as the government rolls back import restrictions while introducing policies to encourage local and international investments in the sector.
REFRESHER- The council is chaired by Madbouly and also includes several cabinet ministers, as well as representatives from the Customs Authority, the Federation of Egyptian Industries, and other state authorities. Private sector players — including representatives from Nissan Egypt, local auto parts manufacturer AutoTec, the African Association of Automotive Manufacturers, and German exhaust system manufacturer Boysen Egypt — have also been tapped to join the council. The launch of the council comes as the government is working to introduce its automotive strategy, the Automotive Industry Development Program (AIDP). AIDP will provide incentives to carmakers in a bid to increase local assembly and component manufacturing here, up the sector’s competitiveness to become a regional manufacturing hub, and bolster export volumes.
The industry’s first priority: Save the factories that already exist. Several facilities in Egypt — including Al Amal Auto’s BYD and Lada assembly plant — have been hurting and teetering on the brink of shutting down altogether as a result of last year’s import restrictions. Al Amal’s factory has been forced to scale down its operations and is now working just four days per week, with its output slashed by some 60% as a result of limited component imports, Chairman Amr Soliman told Enterprise. Resolving problems for existing assemblers would help push the wheel towards more component manufacturing, which would help create a real automotive manufacturing industry, Soliman suggested.
But we shouldn’t lose sight of the long-term goal of localizing automotive manufacturing: The future of automotive manufacturing in Egypt rests on localizing the production of automotive components, our sources stressed. The majority of automotive components and spare parts for BYD and Lada cars, for example, are imported from China, but companies could be encouraged to bring their operations to Egypt with the right set of incentives, particularly as rising global shipping costs are making it expensive to limit manufacturing hubs to countries like China.
The local industry needs to see some policy changes to thrive: The government needs to support the automotive industry by quickly launching the long-awaited AIDP, which will, among other things, encourage international automotive companies to resume car shipments to Egyptian distributors in a more regular fashion, Soliman said. The strategy needs to introduce some tax and customs changes that would put locally assembled cars and completely knocked-down (CKD) units on the same footing as fully imported vehicles, he said. As it currently stands, CKD units are subject to development fees and customs, while there are fully imported vehicles that are imported at zero customs. Automotive players want to see automotive components imported for local assembly without being subject to the current 5-7% customs fees or the 3% development fee, which together drive up the cost of local assembly, Soliman told us.
That begs the question — where do we stand on AIDP? The strategy still needs to be shipped to the House of Representatives for approval and is expected to begin being implemented in 2H 2023, our sources in the Trade and Industry Ministry said. Global conditions are broadly uncertain, but AIDP will provide “attractive” incentives that will attract large investments soon, our source said. The government is already in “serious” talks with several international manufacturers in Europe and elsewhere, who are ready to begin executing on their investment plans once the strategy is launched, the source said.
EV manufacturing is the real future for the industry: We have a golden chance right now to turn Egypt into a regional hub for electric and environmentally-friendly vehicles by bringing in fresh investors and supporting factories’ transition to begin producing EVs, our sources agree. Electric vehicles are “the future of automotive manufacturing in the world,” which is reflected in the government’s new policies that give special focus to EVs, El Nasr Automotive’s Non-Executive Chairman Khaled Shedid told us. This step needs quick and decisive action from the Supreme Council for Vehicle Manufacturing, including providing the necessary funding for industry players, our sources say.
But we might have to start off with EV assembly, rather than full-fledged manufacturing as a first phase, considering the large investments required, Soliman said. Still, there are some environmentally-friendly cars, including dual-fuel vehicles that run on electricity and diesel together, which can run for 170 km on electricity and 1,245 km on 45 liters of fuel, Soliman said.
Meanwhile, our EV infrastructure needs time to catch up with demand: One of the issues the Supreme Council for Vehicle Manufacturing is looking at is expediting the buildout of electric vehicle charging stations and encouraging investments to expand the network of stations across the country, Saad and Soliman told us.
Your top industrial development stories for the week:
Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.
Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID: 553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.