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Tuesday, 17 April 2018

Future investments in Egypt from Nissan, Toyota ride on the Automotive Directive

Future investments in Egypt from Nissan, Toyota ride on the Automotive Directive: Japanese automakers Nissan and Toyota are waiting on the Automotive Directive to decide on how to expand their investments in Egypt, economic counselor at the Japanese embassy in Cairo Hiro Ichiba said. The two companies would invest more here are both considering expanding assembly operations, but cannot take decisions without knowing the government’s policy direction, according to Ichiba. He did not provide further details on the expected size or nature of the companies’ new investments.

A number of automakers have recently announced plans to launch or expand production in Egypt in anticipation of the Automotive Directive, which is expected to be issued sometime in 2018. Last month, we learned that Volkswagen has reportedly already tapped three Egyptian manufacturers to become part of its global parts supply chain to serve demand at assembly facilities across the region. French multinational group Renault is also said to be in talks with potential local partners over a similar-style agreement, while Spanish automaker SEAT is expected to begin assembly operations in Egypt by 2020 through its local agent Kayan.

What is the automotive directive? 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 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

Where does the directive stand? Last we heard, the proposed bill was still with a Trade Ministry-appointed German consultancy, which has had it since before the glaciers of the last ice age melted. We have eight months before EU car imports fall to zero.

The domestic automotive industry is running out of time. We’re about 258 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.

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