Kia, local partner to invest EGP 4.2 bn in Egypt assembly line over the next five years
INVESTMENT WATCH- Kia to invest in EGP 4.2 bn assembly line over the next five years: Kia Motors signed an agreement with Egyptian International Trading & Agencies, which would see them invest EGP 4.2 bn in a car assembly facility in Egypt over the next five years, according to a statement from the Trade and Industry Ministry on Monday. The project will see investments of EGP 262 mn in year one, with the plant eventually having a nameplate capacity of 15,000 cars per year. This would be the first auto assembly project developed by Kia in the Middle East, said Minister Tarek Kabil.
Is the government finally going to push to get the Automotive Directive out? Kabil noted that the agreement was part of a wave of positive news the industry can expect this year as it looks to make domestic assembly more attractive. He said that the government will be looking to raise the domestic components requirement for assembly. This comes as Kabil is expected to discuss local component requirements in the Automotive Directive with several auto producers today, Al Mal reports. As we noted last month, the government is looking to push the quota to 60% from a current 45% and 70% for light trucks over the course of eight years. The bill is expected to see the light in 2H2018, an unidentified source tells the newspaper. This appears to be a delay from the 2Q2018 deadline we’ve been hearing. The legislation had been stalled until a German consultancy completes helping with its redraft. It is unclear as of yet when that will be.
The domestic automotive industry is running out of time. We’re about 293 days away from 1 January 2019. That’s when customs duties on European Union-assembled cars fall to zero, making fully assembled imports more cost competitive than those assembled in Egypt. The government has a choice to make: Does it want to move ahead with the automotive directive and save skilled jobs and investments worth bns? Or does it want to make nice with Germany, which has led the charge against the automotive directive to promote the interests of its own domestic auto industry? The cost of making nice: Factory shutdowns on 1 January 2019.
What is the automotive directive? Effectively, it’s a proposal that would level the playing field for domestic assemblers against what they claim is an unfair trade advantage that favors imports from the EU, Turkey and Morocco. Under the proposal, Egypt would effectively maintain a 10% customs duty on non-European car imports—and impose a 30% tax on all imports including the imports of kits for local assembly. Domestic assemblers that meet local content, volume or export requirements would then get tax rebates or tax exemptions.
This is our last opportunity to emerge as a regional automotive assembly hub. Once upon a time, the Koreans studied our industrial policy. Today, they’ve leapfrogged us, as have Morocco and Turkey. Egypt is positioned to become a hub for energy exports, and our cost advantage in financial services is clear for the world to see. The automotive directive is the last opportunity we’ll have to do this in an industry that could become a national flag carrier. It’s a debate worth having, and it’s time for the government to lead on it.