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Monday, 30 April 2018

Trade and Industry Ministry paves way for Automotive Directive and sets 46% domestic component requirement

Trade and Industry Ministry paves way for Automotive Directive and sets 46% domestic component requirement: Trade and Industry Minister Tarek Kabil issued a directive mandating that 46% of the components of a domestically-assembled car be sourced locally, according to a statement from the ministry on Sunday. The decision also mandates that 28% of a car has to be assembled in Egypt for it to qualify as a “built in Egypt” car. This portion will be reduced by 1% every year following implementation of the decision. Kabil said that the current 45% local content requirement is too little to drive the development of a local manufacturing industry. The decision goes into effect next year.

The move is a significant step toward the issuance of the Automotive Directive, which would offer assemblers incentives to move up the value chain into manufacturing. Kabil said the directive is being looked at by the ministry, the House of Representatives’ Industry Committee and members of the private sector. Kabil did not say when the Automotive Directive, which stalled on its first attempt in the House thanks to heavy lobbying by car importers, will be ready or issued. It has been with an unnamed German consultancy since last year.

The ministry also plans to establish a database to keep tabs on the implementation of the local content changes and measure which local assemblers abide the decisions and are thus eligible for incentives, said Kabil. The committee will also set quality control standards and ensure that these are identical to those in European brand cars. The database will be set up by a committee headed by the Assistant Trade and Industry Minister and will include the head of the Industrial Development Authority.

There are 245 days left until 1 January 2019. That’s when customs on vehicles imported from the European Union are set to fall to zero. That’s when local assemblers close their doors and put thousands of skilled workers out on the street, absent the protections and incentives in the Automotive Directive.

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