CAIRO: Egypt is currently working on a proposed incentive program to boost local car production.
The Industrial Development Authority presented an incentive program to the Ministry of Finance that would see the Egyptian government allocate LE 1.5 billion over the next 10 years as incentives for local car production, Amr Assal, IDA chairman, told Daily News Egypt.
The idea was proposed last year and has been under negotiation to set and confirm the details of the project. A forecasted announcement date has been set for February.
If approved, the incentives will be effective for the current 2011 year and run through 2021.
In order to qualify for the financial incentive, at least 45 percent of the car components must be locally-produced.
“The intended plan is to give local car assemblers an incentive to use components produced locally,” Assal said.
In doing this, other companies who are importing a majority of their parts from outside of Egypt such as Europe, will be enticed to purchase more local components so that they reach the 45 percent qualification, he explained.
In trying to qualify for the program, the local industry should also receive a boost from those companies purchasing local components in addition to those already utilizing their services.
According to Ahmed Khalil, a Beltone Financial analyst, the 45 percent qualification will be boosted to 55 percent for the second year in 2012, which should increase the buying of local components even more.
“The program will boost margins and will definitely be good for the local market,” said Khalil.
The intended plan is to allocate LE 7,000 to LE 8,000 per car as a subsidy for car assemblers to reduce costs.
It is anticipated that the total incentives will range from LE 100 million to LE 200 million per year that directed towards the assemblers.
“While the program will not only increase production and boost the economy, it will also increase jobs,” commented Assal.
He explained that they hope to see jobs in the industry increase by the thousands during the duration of the project.
With GB Auto utilizing mainly local components in production, they will likely see a boost in their profits by receiving a good portion of the allocated money. Other companies looking to benefit from the allocated funds include big automotive players Mansour and Speranza.
Assal commented that companies will not be the only ones benefiting from the incentives.
“Obviously if the production is made cheaper with the incentive money, then the consumer will benefit through reduced prices,” he explained.
The lower prices and more affordability of the automobiles through the program will be an incentive for consumers to purchase and in turn boost the industry as well.
