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Egypts autos industry remains in the doldrums, with demand for new vehicles remaining depressed by a combination of both economic and political strife. According to figures from Egypts Automotive Marketing and Information Council (AMIC), as cited by the Ahram online website in September 2011, total autos sales fell by 33% year-on-year (y-o-y) over the January-August 2011 period to just 111,108 vehicles.

Looking at vehicle sub-segments, passenger car sales are down by 34.4% y-o-y at 83,700 CBUs sold to August, while bus sales were also down, by 34.7% at 7,865 units sold. Truck sales were down by 25.3% at 19,444 units sold, although this did represent an outperformance of the wider market.

Month-on-month (m-o-m) sales are also locked in a seemingly inexorable decline, with passenger car sales of 12,626 units for August representing an 11.5% decline m-o-m.

As of end-October 2011, the best-selling car model in Egypt was Hyundai Motors Verna, which had sold 14,328 CBUs for a market share of 9.9%. In second place was the Chevrolet TRF Single Cab pickup truck on 11,747 CBUs sold (market share 8.1%), followed by the Chevrolet Lanos on 8,468 CBUs (5.9%). Certainly it remains the case that commercial demand for vehicles (such as the Chevrolet TRF) is slightly stronger that private demand for vehicles. However, this reflects the ongoing economic and political uncertainty surrounding the country at the present time.

Clearly, the political unrest and subsequent regime change of the scale seen in Egypt in the first half of 2011 was bound to have a knock-on effect economically and the autos sector was hit particularly hard. A number of companies temporarily halted production completely and investment has been scaled back across the sector to allow time for the ramifications of the political change to become clear.

Vehicle production was severely affected by the unrest, with all companies experiencing total shutdowns for varying amounts of time. Despite the reopening of plants, there was a period of adjustment before full capacity production was resumed and as a result 2011s production has seen big drops. BMI has revised its forecasts accordingly. We now expect total production for the year to amount to 63,224 completely built units (CBUs), an annual fall of 38.0%. We expect the industry to claw back some of this lost ground over the course of 2012 but believe that production will not return to 2010 levels until 2014.

Against this backdrop, it is clear that there remains a downside risk to our new autos sales forecast of 185,680 units for 2012, with our production figure of 76,532 also likely to come under pressure for as long as demand remains so becalmed.

Indeed, one major factor in the decrease in sales seen in 2011 was the decision by local banks to severely restrict car loans. In two-thirds of cases, new car purchases in Egypt are financed by loans and the increasing difficulty in obtaining loans has hit autos dealers hard. Some companies are reacting to this development by forming their own financing units to overcome the restriction of credit. Industry leaders GB Auto and Chrysler have both recently announced the establishment of credit facilities. BMI believes the Egyptian autos sector is likely to see increasing growth of in-house financing schemes.

There is also evidence that some Egyptians may be resorting to criminality in order to secure themselves a vehicle. Ahram Online reported in September 2011 on comments made by General Abdel Fatah Osman, an assistant to the director of public security at the ministry of interior, that some 11,000 vehicles had been stolen from Egyptian streets since the January revolution. Although no prior data was available as a comparison, it is clear that a burgeoning black market in stolen cars must reflect demand for vehicles, which may be stolen from one part of Egypt and then sold again in another part of the country.

The previous government offered significant support for the autos sector and had at the time of its downfall just introduced a ten-year incentive scheme aimed at boosting the local production of autos parts. In March 2011, the new government announced that because of alternative spending priorities the programme was to be postponed without any indication of when or if it would be reinstated. BMI believes the delay in the implementation of the scheme will hinder the domestic development of the autos sector in Egypt and could damage the regional competitiveness of the industry against the likes of Morocco and Algeria, both of which are looking to develop vehicle production.