Ford shuts down local retail operations: US-based automaker FordMotor Company discontinued new vehicle sales in Egypt, effective 26 February, it said in a statement (pdf). The company did not specify what prompted the decision, saying only that it comes as part of its efforts to realign its business strategies and that it follows a consideration of market trends. We were unable to reach company representatives for comment.

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If you’re a Ford owner, don’t fret: While they won’t be selling new cars, Ford and its local distributor Jameel Motors will continue to provide after-sales support, parts, and warranty coverage to existing customers.

Sales were facing headwinds: Ford’s sales have been in decline over the past two years amid a growing preference for more affordable cars coupled with import difficulties, several industry sources told EnterpriseAM. The company, whose market share amounts to no more than 0.5%, discontinued a number of models in the local market over the past years, one source told us. The decision to halt sales entirely is part of the company’s wider strategy to exit peripheral markets where annual sales fall below 1k vehicles per model, the source added.

THE FORCES SHAPING THE AUTO MARKET-

Demand at a glance: Economic cars priced under EGP 1 mn account for nearly 70% of sales, crowding out luxury vehicles and some mid-tier brands amid a decline in purchasing power, said Khaled Saad, head of the Association of Automobile Manufacturers. While it all boils down to personal preference, more consumers are opting for brands that are equipped with better tech and more features at lower price points, like Chinese cars — which are widespread in the Gulf and starting to become more popular here — said Al Ahly Pharos Equity Research Analyst Salma Abdelhay, adding that demand is greatest for Chinese and Korean cars.

Market leaders: Nissan held the largest market share of Egypt’s auto market last year, with a 15.9% share, according to data tracked by the Automotive Marketing Information Council (AMIC). Chery-Ghabbour came in second with a 13.4% share and Chevrolet followed with a 12.2% share. Rounding out the top ten were Hyundai, Toyota, MG, BYD, Mitsubishi, Kia, and Ranualt.

The market is seeing a significant shift towards local production: Import restrictions — including previous halts in the issuance of USD-denominated letters of credit and ACID numbers required to import cars — have prompted a slew of global automakers and local agents to turn to local production by setting up factories here, Abdelhay said. As a result, the completely knocked down (CKD) vehicle market — where cars are shipped in parts and assembled at local factories, as opposed to the completely built units (CBU) market — is growing significantly, she explained. The car market will increasingly gravitate toward locally manufactured models in the coming years, said Saad, adding that the government is firmly committed to supporting the sector's transition to assembly then local production.

ICYMI- A few notable examples: Auto Jameel is set to begin assembling GAC models ; Kasrawy Group is preparing to open a plant for Chinese Jetour and Jac car models ; Al Mansour Auto and SAIC are gearing up to establish a USD 135 mn factory for MG vehicles; and GB Auto subsidiary Itamco and Helwan Company for Machinery and Equipment will assemble and manufacture the Indian Bajaj’s Qute model.

Pulse check on AIDP: The Automotive Industry Development Program (AIDP), which aims to localize the industry, will dole out some EGP 1.5 bn worth of incentives to its participants, a government source told us. These funds have been integrated into the central clearing system and will help offset company dues owed to the Egyptian customs and tax authorities. Our source also indicated that more and more companies are joining the program. Current participants include General Motors Egypt, El Nasr Automotive, Bavarian Auto Group, Arab American Vehicles, Al Amal Auto, GB Auto, Nissan Egypt, Ezz El Arab Automotive, and Aboul Fotouh Automotive.

Limited imports may also help with the localization drive: Auto players are set to import a maximum of 100k cars this year worth some USD 1.8 bn, following discussions the Investment Ministry had with car dealers in December, one of our sources said.

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