CAIRO: As the sprawling Automech car fair wound down in Nasr City this week, Citibank’s booth was still doing a brisk business, signing over several hundred insurance policies in a few days.
This was a big improvement on last year, the team said, when they attended mostly to advertise rather than sell their services.
In a lot of ways, the booth’s growing fortunes mirrored those of the larger Egyptian car-financing sector, which both depends on and catalyzes the expanding car market here, and has been historically limited by a countrywide reliance on cash purchases.
While visitors filed through the artificially-cooled refuge offered by one of the fair’s main tents, head of Citibank Egypt’s auto loans office Amr Nossair sat with Daily News Egypt to discuss how the market has changed since the bank began offering car financing in early 2001.
In its early days, the office signed about 100 loans per month, Nossair said.
Last year, the average had ballooned to about 2,000 per month. From 2006 to 2007, sales grew 107 percent, he said.
“A lot of this is due to the normal growth of the market, which is growing at about 30 percent, Nossair said. The bank has also tried to make getting loans simpler and clearer, as Egyptian consumers – and even dealers – sometimes see financing as a knotty and wasteful process.
In 2001, it took buyers around 10 days to get their policies, Nossair said; that period has now shrunk to an average of 24 hours. In 2007, his division sliced the number of documents needed to secure a loan. They also halved an array of interest rates and abolished some completely.
“It’s basically a revenue line the bank has decided to write off, said Tarek Abdelnabi, head of marketing at Citibank. “We had been a little overpriced for quite some time. If we were to achieve the growth that we seek to achieve, we needed to drop our prices.
Across a region encompassing Europe, the Middle East and Africa, Citibank’s Egyptian branch is the only division that offers auto loans, a testament to the peculiarity of the market here. (In other countries, loans are often supplied directly through manufacturers.)
In 2007, Citibank worked in Cairo, Giza and Alexandria, Nossair said. In 2007, they expanded to three Delta cities and are now planning on expanding into the Red Sea area.
According to in-house statistics, Citibank controls a bit over a third of the car loan market in Egypt. Much of their financing is supplied through deals with manufacturers, as with a recent partnership with GB Auto, Egypt’s principal carmaker.
The chief traits of the Egyptian auto market and its cousin the car financing industry are first that they are small and second that they are growing. There are only about 20 cars per 1,000 Egyptian, while countries like Saudi Arabia and Iran average closer to 35 cars per 1,000 people.
Developed world rates dwarf both these rates: Countries like Austria, the United States and Australia all average around 500 cars per 1,000 citizens, and even lower-end Russia has about 200 for every 1,000 people.
Then there is the cash economy. “The margin of credit to cash in Egypt is very low, said Noassair. “It does not exceed 30 or 35 percent of total sales, which is very low for a country like Egypt. He said this means there is space for lenders to expand without bumping into other competitors too often. Since the market isn’t saturated, companies don’t necessarily need to jostle for market share, but can rather focus on growing the market.
Of course, a free market means some rivalry is inevitable. Companies like Contact Cars, a Cairo-based financing firm that also started in 2001, makes a point of distancing itself from bank lenders, which it says are often impersonal and overly complex. Contact is swelling rapidly too – at a pace of about 80 percent over the past few years.
One worry for some analysts and auto industry officials is inflation, which breached 16 percent here in April. While many economists agree even this lofty rate is unlikely to seriously hinder car sales, higher prices generally shift consumers from luxury goods, like cars, to staples.
Inflation also pressures central banks to raise interest rates, which deters borrowing in general.
Abdelnabi said inflation could heighten the losses of lending banks in general, but that he does not think it will seriously hamper the growth of their auto loan sector. “In the short-term, I don’t think we have any plans to change our rates, he said.
