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Egypt Autos Report Q3 2010
Market |
Automotive and Parts |
Report Type |
Market Research |
Country |
Egypt |
Published |
7 July 2010 |
Number of Pages |
54 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The global economic crisis was a blow for Egypt’s automotive sector, but it was not as badly affected as in many other countries. A significant drop was registered in sales in 2009, to 200,000 units, while production dipped somewhat to103,408 units, according to ourfigures. But both are now on the rise, though it is likely to be 2011 before they outstrip pre-crisis levels. Again, this is a better performance than many other emerging markets. Egypt can leverage on its large population, high levels of growth and rising banking penetration. On the other hand, underemployment, a top-heavy state sector, corruption and widespread poverty restrain a market with great potential. Overall, we expect total car sales to climb 12.6% this year to 225,200 units.
Consumer Confidence is increasing rapidly. In Q110, the ‘Nielsen Global Consumer Confidence Index’ clocked a 24 point rise to 95 in Egypt, the biggest increase worldwide, as reported by Zawya in June. It appears that Egyptian consumers, while affected by the recession, see a bright outlook. Confidence is just two points short of the pre-crisis peak of 94 registered by Nielsen in Q307. The report noted that renewed growth and increased confidence indicated rising disposable income, which should give Egyptian consumers more scope to invest in cars and take out auto finance.
Some Egypt-based producers are bullish. GB Autos, Egypt’s largest public carmaker, claims that its profits will double to almost US$100mn in 2010 as it focuses on exports to the Middle East and Africa (MEA) and starts selling vehicles in Iraq. The firm expects growth to continue and accelerate into 2010. But GB Autos expects demand in its home market to expand by 25-30% year-on-year (y-o-y) in 2010 to exceed 200,000 units. GB’s doubling of sales and surge in profit for Q110, echoes our view that Egypt's auto sector is on track for a recovery in 2010 and sustained strong growth for the remainder of our five-year forecast period.
We believe that local carmakers have had a period of adjustment to increased imports, as the country began reducing tariffs in 2004 under the WTO's General Agreement on Tariffs and Trade (GATT). Total vehicle sales rose 69% in 2005 and maintained double-digit growth until the economic crisis hit sales in 2009. By 2019, tariffs should be eliminated for GATT signatories and we expect average annual growth of 17% for at least the next five years.
But we also suggest a strong threat to local producers may come from the arrival of Chinese manufacturers with domestic operations. Chinese firm Great Wall Motor, which has operations in Egypt, has been granted export rights to the EU for four of its models. This is the first time that Chinesedeveloped brands have been given free access to EU markets, and is therefore something of a milestone, as Chinese brands look to expand their presence on European markets, which are lucrative but have stringent entry standards. While Egypt has little history as a vehicle exporter to Europe, its low-cost workforce and position on the Mediterranean could pay dividends.
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