Efforts to localize the auto industry may be starting to bear fruit: The number of automakers looking to locally manufacture their units here is on the rise, with more and more companies submitting requests to begin locally manufacturing their units. Five companies have already laid the foundations for expanding their local operations in order to meet local demand and export to other markets and more could be coming soon — the Suez Canal Economic Zone (SCZone) is in the process of reviewing additional requests from other firms that also want in, government sources told Enterprise.

As things stand: Egypt currently houses 17 auto assembly plants that used to produce 100k units a year prior to the FX crunch that saw production outputs more than halfening. The auto market still largely relies on imports — Egypt spent USD 2.4 bn on car imports in 2021 before the FX crisis hit.

The latest efforts: The Madbouly cabinet met with representatives from General Motors, Nissan, and Kasrawy Group over the past couple of weeks to look into large scale investments in local car manufacturing.

The companies have big plans in the pipeline: Nissan plans to invest USD 55.9 mn in the Egyptian market until 2026 — it has plans to begin manufacturing a new car model locally and set up a USD 2 mn freezone company. The company has so far invested some USD 235 mn in Egypt; it was the production capacity of 50k vehicles annually. Meanwhile, Kasrawy Group wants to set up a new car factory to produce a new car model, with plans to produce 23k units during the first five years of operation.

And there’s more to come: A number of companies are looking to either expand their local production or start assembling their units locally, a government official previously told us, naming GB Corp, Chevrolet, and Global Auto. The companies alongside the aforementioned General Motors, Nissan, and Kasrawy Group are looking to participate in the upcoming Egyptian Automotive Industry Development Program (AIDP), which will offer incentives to auto players with the aim of localizing the industry.

The details: GB Corp is looking to assemble Chery vehicles locally, while Kasrawy Group is looking to begin locally assembling Chinese Jetour and Jac car models. One investor has already been granted the necessary approvals to assemble one of its SUV models in the Tenth of Ramadan industrial zone.

Increasing local components is key: The government is looking into increasing the required percentage of local components in car manufacturing and aims to wrap up these studies ahead of having global firms manufacture units locally in 2025, our source said.

Localizing the industry could address supply shortages: The interest being shown by companies to manufacture vehicles locally both to sell in the local market and to export will help ease the ongoing shortage in cars — tight restrictions on car imports have seen the market struggle to meet local demand for vehicles, Egyptian Association of Automobile Manufacturers head Khaled Saad told Enterprise. The move to localize car manufacturing will also see the state increase efforts to localize the manufacturing of auto parts and the tech required to produce them.

On the EV front: The government is planning to establish a 50k sqm local EV manufacturingfacility. The Public Enterprises Ministry is in advanced discussions with a Chinese firm to bring back the project of having state-owned El Nasr Automotive produce EVs alongside a foreign partner, our source tells us, adding that we can expect a final agreement before the end of the year.

TO HELP MOVE THINGS ALONG-

Incentives are still needed: The government needs to bring the long-awaited AIDP to life and introduce more industry-specific incentives to accelerate the localization of the auto industry, Hussein Moustafa, a member of the Chamber of Commerce auto division, told Enterprise.

Remember: The strategy, first introduced in 2022, will include incentives to localize the electric vehicle and automotive feeder industries under the AIDP, with the aim of enhancing the country’s existing assembly and manufacturing capabilities — and of encouraging new investment to the sector.

There also need to be additional incentives for EVs, he added, pointing to the need to increase the local component requirement to 45-65%. The sentiment was shared by Al Amal Auto Chairman Amr Soliman, who emphasized the need for incentives in the form of tax breaks to encourage production.

Despite the government’s push for localization, challenges still remain for firms looking to produce locally, industry sources tell us. These challenges include:

  • Limited local demand, driven by the continuing rise in car prices;
  • The presence of zero customs trade agreements, which makes it difficult for locally-made units to compete with those imported and therefore requires the state to grant them preferential treatment;
  • The lack of clear tax incentives and instances of double taxation.

Car replacement initiative could see a comeback: The Finance Ministry is looking into relaunching the initiative to replace old cars with dual-fuel models in light of the gradual increase of production capacities in the country’s auto manufacturing factories. The government is expected to sign agreements to relaunch the program in 1Q 2025, ministry sources tell us.

Remember: The government in 2021 began a multi-year natural gas transition plan to have some 250k old cars be taken off the road and outfitted with dual-fuel engines. Egypt has handed over more than 28k cars to beneficiaries of the initiative to replace car models with greener substitutes.

Your top industrial development stories for the week:

  • A USD 60 mn carbon black factory in the making? One of India’s largest black carbon producers is interested in setting up a USD 60 mn plant in Egypt.
  • Veterinary vaccine factory in the works? The Agriculture Ministry wants to build a veterinary vaccine production plant targeting exports to African and Asian markets.
  • Kraft Heinz doubles production capacity: Kraft Heinz is set to inaugurate USD 50 mn expansions to its factory in Egypt this month.
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