While Middle Eastern markets have so far weathered the global economic crisis, many of Egypt’s key industries have experienced a perceptible slowdown in recent weeks.
The country’s car industry, which is a major employer, has already been impacted by the slowdown, and fears of mass layoffs have led the government to start preparing for an economic stimulus package that will include LE 11 million for the auto industry.
Despite fears that the situation could grow worse, the current prognosis for Egypt’s auto industry in 2009 is far from grim. Market research reports still predict high levels of growth for the market and expect sales to reach 300,000 vehicles for the year, an increase of over 30 percent from 2008.
On the production end, things are looking even better, with local producers expected to manufacture nearly 150,000 vehicles in 2009, with robust future growth predicted through 2012.
Egypt’s growing wealth, increased banking services and expanding manufacturing operations have all contributed to healthy growth in the auto industry.
While all of this is encouraging, it doesn’t change the fact that, at the moment, car sales have plummeted, leaving dealers and manufacturers worried about the future of the industry.
A sure sign of the changing times are the deep discounts advertised on all types of cars in Cairo’s showrooms. Selected Opel and Fiat models are being sold at LE 10,000 off normal prices, with some models marked down LE 25,000.
Meanwhile, Mercedes and BMW prices have also been slashed and are expected to fall further as the market tightens.
“For those who have the money and are confident about their financial future, it’s a great time to buy a car because the prices have gone down so much, said Walid Fahmy, a private financial advisor.
Indeed, while discounts on foreign-made cars will eventually plateau due to a smaller markup percentage, prices on Egyptian-produced vehicles have plenty of room to fall as markup is normally around 100 percent on these cars.
“Cars manufactured in Egypt are produced very cheaply so the profit margin is huge. Depending on the situation, the prices could get very low, because people aren’t willing to spend on expensive items right now, explained Mohamed Salah, development director at Al Mansour Automotive.
Dealers such as Mercedes-Benz are offering extended warranty and service plans to entice buyers in a last resort to meet sales targets.
“The economy hasn’t deteriorated to the point where people don’t have money to buy a new car, but fear of what might happen is making people spend conservatively, so they are less likely to buy a luxury vehicle, despite the discounts and promotional offers being advertised now, said a customer service representative at Mercedes-Benz.
A sales representative at Audi expressed a similar view, explaining that sales at the dealership have slowed down recently but the outlook is optimistic. “As a luxury brand we expect to have slower sales during bad economic periods, but we are finding creative ways to sell cars and hoping that things improve soon, he said.
While sales of luxury car brands are being disproportionately impacted by the current situation due to consumer caution, more affordable brands have also seen a sales slowdown.
Opel and Fiat are implementing discounts, and brands like Toyota and Kia are following suit.
“We’ve definitely had to change our marketing strategy recently to accommodate the economic downturn. Most people are hesitant to buy cars, even our most affordable models, but others are taking advantage of the discounted prices, so there’s been a little drop in sales, but nothing drastic, said a sales representative at Kia.
Despite current problems, the outlook for Egypt’s economy is good. According to a survey conducted by the international business information company Naseba, the Middle Eastern region should not expect to be deeply impacted, and could actually stand to gain from the global financial turmoil.
The survey stated that, “the Middle East is always predicted as the most stable region when compared to others with its high amount of oil exports which is creating a large amount of liquidity in the region.
This means that while other regions struggle, the Middle East could become an investment hotspot for international companies looking to get into new markets, and the auto industry could be an attractive option.
