The new and improved Automotive Industry Development Program kicked off at the start of this month, with the amended seven-year program starting with the new fiscal year said to attract more investments and deepen the localization of the sector, according to an Industry Ministry statement. But contrary to expectations, the minimum local component ratio was slashed, pointing to the government possibly prioritizing bringing over automakers for assembly projects as the first step in its plan to truly localize the automotive sector.

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Under the new rules, factories should roll out at least 10k fossil fuel-powered cars per year, with at least 5k models per model. The minimum local component ratio is set at 20% and will be updated every two years.

Companies assembling — and hopefully one day manufacturing EVs — will start out with a minimum annual production quota of 1k vehicles, which will be raised to 7k by the end of the program. EVs will also have a 10% local component ratio to meet, which will be reviewed annually.

The targeted local component ratios are much easier to meet than previously — the previous iteration of the program that ended on 30 June laid out a 45% ratio. There was even chatter that the rate could be raised to 65%.

Build it and they will come? The change of approach could be a sign that the government is prioritizing getting companies to shift assembly to Egypt first and foremost. Under this logic, the government may think it has a better stab at moving towards proper automotive manufacturing and developing a local ecosystem of feeder industries to increase the local component ratio once there’s already a sizable auto assembly industry that would be more than happy to swap out imported components for locally made ones.

The incentives will apply for vehicles costing no more than EGP 1.25 mn for consumers, with engines smaller than 1.6l.

Incentives will also be pegged at a maximum of EGP 150k, with the ratio also pegged at a maximum 30% of the value of the car once it leaves the factory floor. The incentives will be paid out by deducting tax and customs dues owed by the companies.

But companies producing cars exceeding a 35% local component ratio will be given an extra EGP 5k for every percent increase in the ratio that can push up incentives beyond the EGP 150k maximum. By the end of the seven-year program, the local component ratio will be raised to 25% across the board.

Companies really doubling down on auto localization will also be reimbursed for the land cost of the projects, with factories producing over 100k fossil fuel-powered cars or 10k EVs eligible. Companies that export will also qualify for greater incentives.

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