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Thursday, 26 April 2018

GB Auto boss expects car prices to remain high after zero-tariff cars from the EU enter the market in 2019, pushes on automotive directive

GB Auto boss expects car prices to remain high after zero-tariff cars from the EU enter the market in 2019: Don’t expect auto prices to go down once customs on cars imported from the European Union fall to zero next January, our friend GB Auto Chairman Raouf Ghabbour tells Al Mal. EU-based car assemblers will keep prices to their Egyptian distributors the same in a bid to maximize their own profit margins, he predicted, adding that the average profit margin for local distributors of EU cars is only around 1-1.5%. Prices of EU cars had not gone down since the agreement to gradually lower tariffs began, he noted.

But European car prices will drop, argues Kayan Egypt head Karim Naggar, whose company owns rights to a number of European brands, including Volkswagen and Skoda. He tells Al Mal that the start of 2019 should see sticker prices of vehicles imported from the EU drop by 10-15%, especially if the USD exchange rate for customs remains stable at its current level.

Automotive Directive is the only way forward for the industry: Local manufacturing is the only route to lower car prices — and that won’t happen until the Automotive Directive is passed, said Ghabbour. This law, which offers incentives to assemblers to move up the value chain to manufacturing to compete with EU, Moroccan, and Turkish made imports that enjoy preferential customs regimes, will do much to protect the local assembly industry. He added that the law would provide incentives to local assemblers to export, calling on the government to speedily announce the policies laid out in the Automotive Directive so that car companies can adapt accordingly. As it stands, the legislation is limbo with the Trade and Industry ministry having left the bill with a German consultancy to look at it for what seems like an eternity.

Expect sales this year to grow 20% industry-wide: Speaking on sales in the auto industry, Ghabbour noted that these have been improving for the past three months and expects this year to grow 20% y-o-y industry-wide to 120k vehicles.

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