Hussein Mostafa, the executive director of the Egyptian Automobile Manufacturers Association (EAMA), considers the third annual Egypt Automotive Summit an opportunity for different workers in the sector to consolidate their differing points of view and to come together to make an agreement with the government in order to save the industry.
What are the main aspects you would like to see discussed in the summit?
I believe that the main points of discussion should revolve around preventing the decline of the automotive sector and increasing the growth rate. Discussions should also focus on the impact of economic reform procedures on the automotive market, whether commercial or industrial.
We should highlight the role that banks play in the purchase of cars through instalment payments and leasing to individuals. We should also create a new strategy that encourages the automotive industry and bolster’s the state’s role in encouraging investments in the sector.
It is important to discuss the recent decisions taken by the Supreme Council for Investment and to achieve the goal of reducing the economic burden of owning a car on citizens and providing them with after-sale services.
How do you envision the role of this third summit?
The first two summits raised important issues facing the automotive industry. The main discussion involved unifying the concept between all sectors of the market; including traders, manufacturers, and agents; then between the sectors and the government in order to look into ways to develop the market.
The first summit was about experience, while the second highlighted the issues and sought solutions, whereas the third one is for solutions and compatibility.
What are the main demands of the third summit?
The demands include bringing parties closer to seeking growth in the sector, in addition to making consumers a target and aiming to satisfy them and protect their rights. The demands also include the discussion of recent economic decisions taken by officials and presenting the possible negative impacts that may arise from them in order to find solutions.
During the summit, we also want to find out what the new law for car manufacturing will be, and how to generate foreign capital needed for the import of cars, their components, and spare parts in order to be able to offer after-sale services. We will also be looking at reaching an agreement on the type of new incentives the government is prepared to offer in order to attract new investments.
We will also be demanding that the government fix the customs exchange rate for a limited period of time so that companies can price their cars accordingly.
What are the main challenges facing the automotive sector right now?
First, there is the fluctuation of the Egyptian pound and the increase in the price of the US dollar. Then, there is also the difficulty in obtaining enough foreign currency to import cars, their components, and spare parts.
The increase of vehicle customs by 100%, and the government’s unclear vision towards the automotive sector after the delay of proposing a new strategy towards car manufacturing, are also considered challenges.
These challenges have caused a decline in the volume of sales of the car market. This threatens the continuation of pumping investments in the sector.
Do you see the investment opportunities for feeding industries in the Suez Canal Economic Zone?
The Suez Canal Economic Zone is promising, especially given that an area within it was allocated to car factories and feeding industries. Clear incentive packages must be announced to attract investors.
I believe it is important to develop these areas with the required utilities and paved roads. Car manufacturers in these areas would have to create new parts, and manufacturing should be done in a way that allows its products to be exported according to industry global standards. There will also be coordination with international companies to supervise the manufacturing of the components and to export them from Egypt to global factories.
What is your opinion about the tax and customs systems and its impact on the automotive sector and feeding industries?
Customs fees have doubled, which increased the prices of cars. Moreover, the daily fluctuations in the customs exchange rate makes it difficult to set prices. This hurts consumers who have to deal with the price increases.
By approving the new car manufacturing law the state would impose a new industrial development tax on companies that would not benefit from the automotive strategy of the new law. This will increase the price of various cars and make it very difficult for them to continue operating in the local market. On the other hand, custom fees will be unified on non-European cars, which is considered a positive aspect for companies involved in the programme, and opens doors for local industries that are exempted from the new tax.
How do you see the decision to float the pound and its impact on the automotive sector in terms of the costs and investments?
In terms of the cost, the floatation has already increased the importing price of cars and the production materials, but with the dollar reaching its fair price, which is not more than EGP 12, we expect a decline in prices.
In terms of investments, it is expected that the flotation will attract foreign investments and make international car companies take a second look at investing in the Egyptian market, especially with the issuance of a law to adjust the tax and customs systems, and a new investment law which will provide new investment incentives.