The Ministry of Industry has recommended a committee form to create rules to govern local auto manufacturing. The committee would include the Industrial Development Authority, and the transport and automotive feeder industries divisions of the Federation of Egyptian Industries (FEI).
The ministry aims to resolve the recent disputes between car companies over the current automotive industry strategy. The plan was prepared by the former minister of industry, Mounir Fakhri Abdulnour, and presented to the House of Representatives by the current industry minister, Tarek Kabil, for discussion.
Board member of the transport division, Samir Allam, said the first meeting of the committee will be held within the next few weeks. The local manufacturing sector at the Industrial Development Authority will be represented by their director, Alaa Salah El-Din. Allam and all fellow members of the transport and feeder industries divisions will be part of the committee as well.
Allam said the future auto strategy is still unknown. He pointed out the strategy is no longer a priority for the Industry committee in parliament this coming period, this is unless it is amended to benefit all parties and not specific companies.
The past two months a number of auto manufacturers have submitted suggestions for amendments to the auto industry draft law in the transport division.
Allam said that the Bavarian Auto Group, Fiat Chrysler Automobiles, and Toyota Egypt have presented proposals to amend a number of items in the draft law. These amendments aim to increase flexibility in dealing with the incentives program of the auto strategy. The companies demand that the incentives should be equal to what the companies have implemented in the program. When a company achieves local components up to 55 percent instead of the required 60 percent, it should receive incentives equal to its achievement, rather than the same level as companies that did not achieve any increases. The same goes for exports and quantity of production.
He expressed regret over the disputes inside the transport division over the auto draft law’s amendments. He added that a number of members rejected amendments on the principle “of equating companies that achieve an increase in their production or export to those that did not achieve anything.”
Allam said, “The auto strategy in its current form comes with the interest of certain companies, so the parliament postponed it for reconsideration.” He stressed that making the strategy more flexible in dealing with granting incentives would be the solution to release the strategy, adding that the transport division will hold a meeting in the coming days to discuss the new suggestions.
The Transportation Division held a meeting two months ago to discuss the repercussions of delaying the release of the automotive draft law, and the possibility of reformulating the law again. The postponement of the auto strategy came after a large number of car companies of importers and manufacturers said that the draft law will benefit only one or two companies which prompted the parliament to postpone the discussion of the law.
Parliamentary sources stated that the industry committee tried to solve the disputes that have erupted between the car companies on the draft law and held a meeting with a number of these companies outside of parliament. The meeting included Volkswagen, Seat, Kia Motors, Auto Jamil, Ford, Daihatsu and Brilliance, as well as a number of food industry companies.
The participants agreed to submit a memorandum including all the importing companies’ suggestions to amend the draft law to the parliament’s industry committee within 15 days after the meeting. The sources added that the companies discussed paragraph (3) of Article VI in the auto draft law which regulates offering incentives for exporting companies, whether cars or spare parts.
Importers also presented the challenges they face when they supply locally manufactured components to their parent companies, so that they can benefit from export incentives.
The draft law will grant manufacturing incentives by 23.05 percent for passenger cars up to 1,600CC, 50 percent for the category of 1,600CC to 2,000CC, and 57.45 percent for more than 2,000CC. For transport vehicles, the draft law will grant incentives by 23.05 percent for 10- 16 passengers cars, while cargo trucks with a weight of less than 5 tons will receive a 16.65 percent incentive, and cargo trucks weighing 5-9 tons by 9.9 percent. This incentive is calculated based on the value of the sales bill, including the value of the vehicle and the total taxes. The incentive is granted for the companies that increase the domestic production rate gradually during the program years, up to 60 percent in the case of passenger cars and micro-buses, and 70 percent in light and medium cargo vehicles.
If the local manufacturing ratio was lower than the required rates, the incentive would be offered based on the export of local components or the export of locally produced vehicles.
It is also possible to get the incentive if the company’s production reached 60,000 passenger cars with a capacity of maximum 1.6 liters, 8,000 cars with a capacity of more than 1.6 liters, or 50,000 cars for cargo trucks. The draft law also stipulates that the Industrial Development Association (IDA) will establish a fund called “the Development of the Vehicle Industry”. The fund would be responsible for administering the program and granting the incentive. Its resources consist of the proceeds of the industrial development tax collected from the companies benefiting from the program. The Fund will be managed by a board headed by the Chairman of the IDA.