CAIRO: A report from the Automotive Marketing Information Council (AMIC) recorded a year-on-year increase in passenger car sales by 25 percent in October. Although the 16,212 new cars will swell the ranks of the 2 million vehicles already crowding streets in and outside Cairo, the jump in sales is good news, signaling increased consumer confidence in Egypt’s economic stability.
Ali Tawfik, Chairman of the Egyptian Auto Feeders Association, confirmed that Egyptian consumers are feeling bullish, and thus are looking to purchase cars.
“Although Egypt did not suffer the same economic downturn that affected other countries, the emotional impact of global crisis was general hesitancy among Egyptian consumers. Now that their suspicions of Egypt’s stability are lessened, people are starting to behave normally again.
Car sales, although not as significant an indicator of consumer confidence as the housing market, are especially telling in Egypt, where high tariffs make each car a major investment.
Salah El-Hadary, the head of the AMIC, however, laughed at what he considers an overreaction to the 25 percent figure.
“Has everyone forgotten what happened last year? The crisis hit in September, so of course sales fell in October. Of course year-on-year sales are higher, he chuckled.
El-Hadary explained that sales did not begin to rise again until last February, but have since maintained steady increases of between 4 and 14 percent. Sales have yet to return to pre-crisis figures, although he expects to see these numbers achieved by March or April 2010.
“I think we will reach 200,000 total sales for 2009, compared with 218,000 last year, El-Hadary stated, expressing more optimism than an HC Securities report that set expected car sales at 168,000 units in 2009.
Car sales are expected to keep growing. In August, the Egypt Retail Report Q3 2009 released by Business Monitor International predicted a 97 percent rise in Egyptian car sales by 2013.
El-Hadary warned against paying too much attention to long-term projections. “Did anyone foresee what would happen in Dubai? he asked, referencing the recent announcement of Dubai’s massive debt default. “We’ll just have to see what the market does.
Still, a growing middle class – specifically young people with money to spare – is driving general increase in retail sales across the board, according to the report.
Auto-specific factors in the rising car sales include the government’s taxi replacement program to swap old vehicles with more fuel-efficient cabs. Additionally, the reduction in the high automotive tariffs, planned for implementation in 2010 by the General Agreement on Tariffs and Trade (GATT), will make cars more affordable.
Tawfik explained that the GATT stipulates that customs duties on European cars decrease by 10 percent over the next 10 years, meaning that each year European cars become a bit more attractive to consumers.
The government plans to offer incentives to Egyptian car manufacturers who increase local content in car production to keep Egyptian cars affordable against their European competitors.
When questioned on how Cairo’s infrastructure of roads and bridges, already filled over capacity, would accommodate the ever increasing number of vehicles, both Tawfik and El-Hadary cited the government’s replacement program.
Similar to the taxi replacement program, the government will offer new microbuses to replace those over 20 years old, as well as an optional program for replacing outdated private cars.
El-Hadary stated emphatic support for the car replacement program. “Replacing the old cars will allow car sales to increase without leading to an unmanageable increase in vehicles on the road. It will ease the problem of air pollution as well as traffic. Many of the traffic problems we currently experience result from delays caused by breakdowns, he stated.
Tawfik pointed out that one of the major contributing factors to Cairo’s notorious traffic are the parked cars clogging the streets.
“It’s not that Cairo’s streets are too narrow and need to be widened; it is simply illegal double-parking. But the government cannot simply begin fining people for parking violations. Parking space is so limited, people have no other options.
Tawfik advised that more parking garages be dug under buildings, and that property owners collaborate with construction engineers to join multiple subterranean garages, allowing room for more cars with fewer entrances and exits, that can also delay traffic. He insisted that new developments always plan to accommodate parked cars.
In addition, Tawfik cited the need for a public transportation system that any Egyptian would chose to take. Currently those riding the metro and public buses are people who cannot afford their own car. Tawfik hopes for a transport network that saves people time and money, providing an option with sufficient appeal that even middle and upper class Egyptians would opt for convenient public transport over the cost and hassle of a private car.
Although the construction of the third metro line is currently underway, Tawfik acknowledges that without sufficient government attention to improving public transport, announced increases in car sales may soon no longer be received as good news.
