How the new East Port Said Automotive Zone is being set up to spur the development of Egypt’s automotive industry: As Egypt works to develop its automotive industry, we’re pushing to set up dedicated industrial hubs for the industry to bring in global names. The East Port Said Automotive Zone (EPAZ) is one such hub that is designed to attract global automobile manufacturers to leverage East Port Said’s prime geographic location and a handful of incentives being offered for manufacturers at the zone. Enterprise sat down with East Port Said Development (EP) Managing Director and African Association of Automobile Manufacturers (AAAM) Vice President Ahmed Fikry Abdel Wahab to discuss the vision for the new zone, and how Egypt’s automotive industry can move up the value chain.

REMEMBER- Last month, a delegation of automotive and automotive components producersattended a meeting of the African Association of Automotive Manufacturers (AAAM) to look at potential investments in Egypt's automotive industries. Participants we spoke with at the time signaled that Egypt's automotive industry has potential to become the largest market in the continent by the middle of the next decade, supported by existing incentives and market dynamics, along with government plans to localize the industry.

The automotive industry is like a “magnet” for feeding industries: Creating a real automotive industry “isn’t just about the factory that assembles vehicles. It’s about all the feeding industries that provide all sorts of components — wiring, harnesses, seats, dashboard glass, interior carpeting, tires, etc.,” Abdel Wahab said.

Scale is the biggest driver of the industry: It’s difficult to attract new manufacturers in these feeding industries unless there is market and volume, he said. “A couple thousand cars per year is not enough in terms of volume — but if you’re talking about 100k cars, that means 400k tires, for example. Now we’re talking. Now you can seek out international manufacturers to bring to Egypt.”

That’s part of where EPAZ comes in: “Our vision is if we start with three original equipment manufacturers (OEMs), each of which is making 10-20k cars a year at EPAZ, that would bring us to somewhere around 50k cars per year,” Abdel Wahab said.

Making the economics work: To establish factories of the same scale as ones in major automotive-producing markets like Morocco, it would cost at least USD 1 bn, Abdel Wahab said. “This is a huge and risky financial undertaking, so we decided to slice the elephant. The biggest expenses in these factories are the stamping and paint production lines, so we’re looking at setting up a shared facility with these lines for more than one manufacturer to use,” he said. This shared facility would require some USD 500 mn in investments, he told us.

Critically, the zone’s location will help make operations efficient for manufacturers: As manufacturers will naturally rely on imported components to a certain degree, East Port Said’s location will make the shipping process more practical and efficient, Abdel Wahab said. Once vehicles are manufactured, they can then be hauled off to the roll-on roll-off station in the Suez Canal Economic Zone’s East Port Said Port being developed by Bolloré, Toyota and NYK. The RoRo terminal will include a wharf area that will allow two large Pure Car and Truck Carriers (PCTC) to berth simultaneously, and will also offer enough vehicle storage space to accommodate increasing future demand.

Manufacturers setting up shop at EPAZ will have access to a handful of incentives — but with prerequisites: The incentives provided to manufacturers coming to EPAZ will be based on four main criteria: Value addition, investment size, production volume, and environmental compliance, Abdel Wahab told us. Investors’ incentives will be assessed on how much value they’re bringing to the local market, with an equation of sorts based on the total value of the car once fully assembled, and the value of the components that are imported and sourced locally, he said. There will also be requirements on investment size, with a floor set at USD 4 mn, as well as volume production, where EPAZ is looking for a minimum of 10k cars per year per factory.

Investors will also get tiered incentives depending on the degree of environmental compliance, which will be based on Euro standards — lower carbon emissions will yield larger incentives. “The incentives are designed to encourage manufacturers to address the four pillars in their activity. They’ll need to invest more to increase their value addition, but in return they get incentives that cut down on expenses within the country, whether it has to do with taxes, customs payments, or utility bills,” Abdel Wahab said.

Your top industrial development stories for the week:

  • Keep cement supply cuts in place, industry tells regulators: Cement factories have filed a request with the Egyptian Competition Authority (ECA) to extend a quota system that enforces cement production cuts.
  • Concrete Plus brings in Saudi investor for SCZone tire plant:Concrete Plus has set up a JV with an unnamed Saudi investor to partner on its EUR 750 mn tire factory in the Suez Canal Economic Zone
  • Sprea Misr opens sulfuric acid factory: Egypt Kuwait Holding’s (EKH) petchem subsidiary Sprea Misr yesterday inaugurated a EGP 1.4 bn sulfuric acid production plant.
  • Alstom to invest EUR 300 mn in Borg El Arab factories: French rail manufacturer Alstom plans to invest some EUR 300 mn in Egypt over the next three years to establish two factories in Borg El Arab to produce electrical systems and metro and monorail rolling stock.
  • AUTOMOTIVE LEGISLATION- MPs approved legislation that will see the establishment of a new regulatory body — dubbed theSupreme Council for Vehicle Manufacturing — to set policy for the local automotive industry (including EV assembly), as well as set up a new fund to offer incentives to companies in the business of assembling environmentally-friendly cars.
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