The Finance Ministry is considering exempting imported auto parts used in manufacturing from the 3% state development fee, to instead collect the fees upon commercial sales and during license renewals, following a proposal from car manufacturers, a government source told EnterpriseAM. The move would be part of the government's efforts to localize the auto industry, the source said.

The plan would come as part of a larger overhaul of the current tax system, with the government looking to replace many of the various fees charged by different entities with a single unified additional tax on net income, which aims to streamline the tax system and reduce the administrative burden on businesses.

The move comes amid other initiatives to help localize the auto industry, including the Finance Ministry allocating some EGP 3 bn in the upcoming fiscal year’s budget to fund the Automotive Industry Development Program (AIDP), up from the EGP 1 bn it had allocated for the current fiscal year, the source said.

The government is also looking to attract more manufacturers to the local automotive industry, especially Chinese companies, who have shown particular interest in investing in Egypt, our source said. The AIDP will dole out some EGP 1.5 bn worth of incentives to its participants, with the funds having already been integrated into the central clearing system. The move aims to help settle the arrears automakers owe to the customs and tax authorities and provide liquidity to manufacturers.

This wouldn’t be the first time an industry was exempted from the development fee in the name of localization, after the Finance Ministry implemented a similar exemption from development fees for imported mobile phone components back in March 2023.

IN OTHER AUTOMOTIVE NEWS-

#1- MM Group for Industry and International Trade’s (MTI) is planning to expand into third-party manufacturing and assembly of commercial vehicles in 2025, Chief Investment and Investor Relations Officer Ashraf El Ghannam told Asharq Business. The company is looking to roll out the activity in partnership with another local entity.

#2- Kasrawy Group plans to invest some USD 150 mn over the next three years to locally assemble vehicles, group's automotive division VP Mostafa Hussein told Hapi Journal. The group has already secured over 100k sqm of land in Sixth of October City to build its factory, which is expected to have a production capacity of 50-60k vehicles annually, according to Hussein.

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