Egypt’s auto market is finding its footing after a bruising currency crisis, with early signs of a pickup in passenger car sales despite inflation’s impact on consumer budgets, according to Fitch Solutions’ research unit BMI’s 1Q 2025 Auto Report.

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A sales recovery in the making? BMI forecasts a 15.3% y-o-y increase in vehicle sales for 2025, following an estimated 21.9% y-o-y rise in 2024 driven by a more stable EGP that has eased import costs for vehicles and parts. New vehicle sales climbed 12% y-o-y to about 78k units in the first 10 months of 2024, bolstered by an 18% y-o-y jump in passenger car sales, with Nissan, Chery, and Chevrolet holding 15.1%, 13.6%, and 12.3% market share respectively. Truck sales, meanwhile, held steady, while bus sales fell 15.6%.

Driving the growth: BMI’s outlook hinges on critical FX inflows from the USD 35 bn Ras ElHekma agreement, as well as our expanded USD 8 bn IMF program agreement, which has unlocked vital funds and eased balance-of-payment pressures.

Egypt could be set to see passenger car sales growth this year: BMI is “cautiously optimistic” about a continued recovery of the passenger car market in 2025, which could see sales recover as sustained falls in inflation bolster households’ finances and pent up demand from 2024 gives way to more passenger car purchases as the economy improves. Still, continued high inflation and weak consumer sentiment could make consumers wary of large purchases, with BMI predicting that Egyptians are likely to hold onto their cars for longer periods in the near future.

Commercial vehicle market eyes recovery, but cost pressures loom: Egypt’s commercial vehicle sales remains subdued as businesses hold off on fleet expansion amid continued economic uncertainty, according to BMI. While a rebound is expected due to a low base effect after last year’s market dropoff, demand remains weak as companies prioritize cost efficiency. In addition, a weakening EGP is driving up import costs for vehicles and components, which is likely to be passed on to consumers, further dampening demand. Infrastructure projects — particularly the New Administrative Capital — provide one source of optimism for the commercial vehicle sales sector, with BMI noting that such projects could boost demand for commercial transport.

Inflation remains the key factor to watch with regard to the sector’s broader recovery, with annual headline urban inflation dropping to 24.1% in December — its lowest reading since December 2022. BMI expects it to decline further to 16% y-o-y by February, but persistent price pressures will likely keep it above the central bank’s 5-9% target range in the near future, tempering the pace of a market recovery.

Public transport could be a springboard for EV growth: Egypt is banking on electric buses to kickstart its EV ambitions, betting that public transport electrification will gain traction faster than private car adoption.The report highlighted the government’s 2022 plan to transition all public buses to gas or electric by 2027, backed by a World Bank-supported push to expand fleets in major cities. Still, BMI noted skepticism over whether or not the project would be executed, citing past stalled government initiatives like increasing EV charging stations and offering targeted incentives to boost local EV production.

Despite this, BMI expects Egypt’s EV market to expand, fueled by state-backed subsidies, tax breaks, and golden licenses. While weak charging infrastructure could slow adoption, long-term prospects remain strong, with tariff cuts and interest from global players like Stellantis positioning Egypt as a future auto hub.

The private sector has indeed been helping out with the e-bus transition: Kastour Egypt has begun assembling Foton’s electric buses, while El Nasr Automotive has rolled out its first batch of e-buses in partnership with China’s Yutong. Chinese automaker Jinbei is also set to start local assembly this year. Meanwhile, Volvo and MCV are building e-buses for export to Europe with at least 50% local components.

Egypt remains a regional underperformer in BMI’s Auto Sales Risk/Reward Index, ranking 11th in MENA and 82nd globally during 1Q 2025. Lower incomes and political risk weigh on consumer and business sentiment, limiting vehicle affordability and sales growth, according to the report. However, a large driving-age population and a solid long-term sales outlook provide opportunities for expansion. While the affordability gap remains a hurdle, Egypt’s potential for automotive retail operations is bolstered by its market size and gradual economic stabilization.

According to BMI’s methodology, Egypt ranks 2nd in MENA and 43rd globally for auto production, boosted by low labor costs that make it attractive for vehicle assembly. However, a relatively unskilled workforce and lack of a clear auto policy limit higher-value manufacturing. While cost efficiency remains a draw, economic and political risks pose challenges. Still, Egypt’s strategic location as a gateway to African markets and growing government support could drive long-term investment and industry growth, BMI writes.

Regulatory developments also got the nod: The report mentioned the formulation of a newFinance Ministry unit aimed at streamlining customs and tax procedures as a plus, as well as improved USD liquidity and looser import restrictions as likely to create a more predictable environment for manufacturers.

Remember: The Madbouly government has been working to localize the auto industry, introducing the Egyptian Automotive Industry Development Program in 2022, which will offer incentives to auto players with the aim of localizing the industry and its feeder industries in efforts to enhance the country’s existing assembly and manufacturing capabilities — and encouraging new investment to the sector.

Your top industrial development stories for the week:

• Chinese smartphone makers eye local production in 2H 2025: Two unnamed Chinese smartphone manufacturers plan to enter Egyptian markets during 2H 2025, after assessing market needs and demand for smartphones. The move follows Egypt’s decision to impose a 38.5% taxon imported phones, which unnamed sources tell Al Borsa has encouraged a number of foreign phone manufacturers to consider setting up shop in the country. (Al Borsa)