Having their own car is something every person who has experienced public transportation in Cairo dreams of. In this city, a car is the key to comfortable urban mobility.
Unfortunately for most, purchasing a car in Egypt is an expensive, bureaucracy-ridden process made more difficult by the lack of reliable financing or a regulated used car market.
As a result of these difficulties, visiting businesspeople, students, expats and many others have regularly turned to Egypt’s rental car market.
“It’s hard to be without a car, especially having to get from Maadi to New Cairo for university on a daily basis. Sometimes I rent a car on the weekends or when I go on trips because it’s just so much easier than taking public transportation, said Olivia Quinn, an American student living in Cairo.
Cairo’s five-star hotels and commercial areas are full of international and local car rental agencies. The options for renters are numerous: cars with drivers, cars without drivers, short or long-term rentals, tourist plates or private plates.
The make of the car is negotiable as well, but the standard rental vehicle will be something along the lines of a Toyota Corolla or a Mitsubishi Lancer – sturdy cars that give the rental company good value for money.
Amr Abdel Halim, CEO of Smart Cars, a local rental company located on the Maadi Corniche, told Daily News Egypt that despite the easy accessibility of cars through rental companies, the local market remains underdeveloped.
“The industry is struggling due to high related costs. Registration costs for new vehicles are expensive, and the customs duties and taxes on cars are high.
According to Abdel Halim, one of the biggest challenges to the local rental industry is obtaining quality vehicles at reasonable prices. He added that the challenges facing the market have an upside for companies like his: insider knowledge gives local rental businesses the competitive edge.
“As a local business we know more about the market, cars and maintenance. This allows us to offer lower rates to our customers than they would get at international companies, he said.
Still, local companies have more difficulty attracting short-term business from tourists, as these customers often opt for international brands located conveniently at the Cairo Airport and the city’s major hotels.
Local businesses like Smart Cars take most of their business from long-term rental customers. Their clients include foreign residents, visiting expatriate Egyptians, summer tourists from the Gulf countries and local corporations who rent cars for visiting experts or clients.
“About 30 percent of our clients are short-term renters, while 70 percent rent over the long term. Summer rentals, which we call ‘spot rentals,’ are a huge part of our business. Most of the cars are rented without drivers, but our corporate clients and Gulf clients usually want drivers with the cars, explained Abdel Halim.
The demand for chauffeured cars is high in terms of the overall rental market, but it is constrained by a lack of suitable drivers to employ. While private drivers are common throughout Cairo, rental companies seek to hire well-trained professionals and these are much harder to come by.
Still, Abdel Halim sees this sector as a growing area of the car rental business.
“The market is growing in Egypt, especially with corporate clients who want cars with drivers. Also, the state of public transportation in this country is making more people turn to renting cars if they aren’t in a position to buy one, so the market has good prospects for the future, he said.
The future of the rental market in Egypt depends on the ability of companies to overcome the many hurdles that constrain business, which include lack of coordination with car manufacturers, government traffic authorities and lending institutions.
Currently, local car manufacturers have not worked with rental companies to provide bulk discount rates on cars. Creating this type of partnership could help the industry as a whole overcome the problem of overpriced cars, and uncertain resale values.
“Profits from the resale value of vehicles are an important part of the business, and it is hard to make good profit margins when the vehicles are so expensive to begin with. I’m always worried that they will suddenly remove tariffs on cars and the value of our vehicles will plummet, said Abdel Halim.
The industry could also benefit from better communication with government traffic authorities, so, for example, a fine for a traffic violation by a rented car could be identified instantly and included in the renter’s bill instead of borne by the company.
Rental companies have also experienced roadblocks to investment, due to a lack of leverage with local lenders. Because of the large volume of capital needed to develop a rental fleet, and the reticence of local lenders to give credit to car rental companies, Smart Cars has been forced to employ a private equity lender to allow for new investment.
Another strain on the market is the growing finance leasing industry, which could present competition for traditional rental companies as it expands.
On a positive note, the government’s recent legalization of GPS is expected to make an impact on the rental industry. New arrivals to Cairo will be more likely to brave the streets armed with a GPS to guide them, which could result in a larger tourist market.
In spite of the challenges facing the industry, Abdel Halim is optimistic about the future of Egypt’s car rental industry, and has plans to double his fleet and expand his business 200 percent over the coming three years.
“The country is growing and people need reliable transportation. As long as we focus on growth, cost control and revenue maximization, there is nowhere to go but up.
