CAIRO: Egypt’s Ministry of Trade and Industry has postponed a proposed local automotive incentive program until further notice.
“This strategy was aimed at supporting and increasing the market auto feeding industry,” said Ahmed Abdel Ghani, a research analyst at CI Capital.
“The postponement will have a negative effect on the industry now,” he told Daily News Egypt in a phone interview.
The program, dubbed “1M2020,” was intended to boost the production of locally produced components by offering an incentive to use at least 45 percent of components that are produced within the country as a way to enhance the market and entice both producers and consumers.
The “1M2020” program was designed to produce one million of these vehicles in 10 years through two phases from 2010 to 2015 and 2016 to 2020.
“This was set to offset the gradual elimination of custom duties on the imported completely built up (CBU) vehicles,” said Abdel Ghani.
He explained that the strategy was to reduce the market price for those vehicles because some parts, such as the engine and chassis, can not be produced locally due to lack of skill.
This was set to support the customer’s purchase of passenger cars less than 1600CC as well as light and medium trucks, pick ups and minibuses.
The strategy was also to attract investments in the Egyptian market by Original Equipment Manufacturers (OEMs) as way for them to increase their models’ sales by benefiting from the incentives that were being offered.
“The government wants to attract investments, such as from Volkswagen and Toyota, but right now it can’t afford to go through with the program,” Abdel Ghani said.
While companies haven’t felt the affect of this yet due to the fact that the program was set to start last month, Abdel Ghani says that they will be somewhat disappointed by the postponement because of the lack of sales and government support to the industry.
“Some companies though, such as GB Auto, won’t be affected at all because their components are produced abroad so the program did not matter to them, but there are other companies that will be because they were setting up to produce their more components locally because of the program,” he adds.
The incentives were expected to reach a worth of approximately LE 1.5 billion.
“I believe the program could be implemented by 2012, but not during 2011,” he said, explaining that the government is reprioritizing their spending after the recent events.
“The money will be used to for other things that have been seen as higher priorities such as increasing wages,” he added.
