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Wednesday, 3 August 2022

On the airwaves last night: The crisis facing the automotive industry + the US-China row over Taiwan

Divergent views on the causes of the current issues facing the Egyptian auto industry were on display on Al Hayah Al Youm last night, when Mohamed Sherdy spoke to YouTuber Essam Ghanayem and head of the car traders’ federation Osama Abou El Magd about the crisis in the sector (watch, runtime: 28:48). In a sometimes heated debate, the two car connoisseurs differed on whether the sources of the problems are at home — overpricing and import restrictions — or abroad, with global inflation and supply chain issues posing problems.

Removing restrictions on imports of used cars could offer the industry some reprieve, Ghanayem suggested — a view that would be hotly contested by licensed distributors, particularly those that have invested 100s of mns in assembly facilities. Ghanayem didn’t explain how the idea would make it possible for banks to somehow find FX for importers who want to bring in used vehicles. Another short-term solution would be removing restrictions on Egyptian expats abroad to ship their cars into the country — a restriction that sends car demand surging, especially during the peak summer season when expats return home, Ghanayem said, adding that this issue could compound the current car shortage in the country.

Ask a distributor and they’ll tell you the problem is simple: They can get letters of credit open for imports of spare parts and tires — but cars are another story. L/Cs for fully assembled vehicles (completely built up, or CBU units, in industry-speak) are just about impossible to obtain. Most are having more success with L/Cs for assembly kits (or completely knocked-down — CKD to insiders), albeit at much lower volumes than they want. Distributors have comparatively better access to L/Cs for spare parts and tire imports.

Why CKD and no CBU? CKD assembly lines employ thousands of people. Cars that are imported fully assembled don’t support nearly as many jobs.

Background: Car sales have been falling on a monthly basis as the automotive sector is being buffeted by a multitude of headwinds, including a lack of financing for imports, rising inflation, component shortages and the EGP devaluation in March.

President Abdel Fattah El Sisi wants the government to hurry up developing the textiles industry and focus on getting the world’s largest spinning and weaving factory in Mahalla Al Kobra up and running by next year. This came during a meeting with Prime Minister Moustafa Madbouly and Public Enterprises Minister Hisham Tawfik yesterday, which got coverage on Masaa DMC (watch, runtime: 6:25) and Al Hayah Al Youm (watch, runtime: 2:35).

The talking heads were also concerned about the possibility of a global crisis erupting between the US and China due to US House Speaker Nancy Pelosi’s visit to Taiwan, which we have more on in this morning’s What We’re Tracking Today section, above. Sada El Balad (watch, runtime: 11:38), Ala Mas’ouleety (watch, runtime: 4:42) and Masaa DMC (watch, runtime: 22:26) all covered the developing story and its potential ramifications.

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