{"id":584581,"date":"2023-04-02T00:00:00","date_gmt":"2023-04-02T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/how-our-tire-industry-is-in-sore-need-of-development\/"},"modified":"2023-04-02T00:00:00","modified_gmt":"2023-04-02T00:00:00","slug":"how-our-tire-industry-is-in-sore-need-of-development","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/how-our-tire-industry-is-in-sore-need-of-development\/","title":{"rendered":"How our tire industry is in sore need of development"},"content":{"rendered":"<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"\"> <\/span><span style=\"font-weight:700\">Kicking the tires of our weak tire industry: <\/span><span style=\"\">Annual urban inflation <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.press\/stories\/2023\/03\/12\/inflation-surges-to-five-and-a-half-year-high-in-february-far-above-analysts-expectations-99377\/%23:~:text%3DFigures%2520released%2520on%2520Thursday%2520by,was%2520running%2520at%2520almost%252033%2525.\" style=\"\">jumped<\/a><\/span><span style=\"\">31.9% y-o-y in<\/span><span style=\"font-weight:400;\"> February, up from 25.8% the month before. And if you\u2019ve gone to get a tire change recently, you may have noticed that tires have not been immune to the jump in prices, with average prices for some tires rising 300% y-o-y, industry insiders tell Enterprise. This mostly comes off the back of a tire shortage resulting from dwindling FX reserves and import restrictions \u2014 unsurprising, as Egypt imports 100% of its Passenger Car Radial (PCR) tires.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">But the problems of the industry go beyond imports: <\/span><span style=\"font-weight:400;\">The shortage has been compounded by a range of underlying factors beyond the immediate impact of inflation and the FX shortage. These include an increase in logistical costs, the closure of key component manufacturing firms, limited know-how and labor shortages. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">A fledgling domestic industry:<\/span><span style=\"font-weight:400;\">Egypt consumed around 10 mn tires in FY2022, of which only 1.5 mn (or 15%) were produced domestically, with the rest of the supply coming from imports, head of the Arab Federation of Tire and Rubber Industries, Tarek Ahmed tells Enterprise, citing data from the Customs Authority. Egypt only produces truck tires and two & three-wheelers, so almost our entire supply of passenger car tires came from abroad, he noted. On top of that, Egypt exported 680k tires that year, or 45% of all domestically-produced truck tires, with locally produced tires making up the overall tire market, Ahmed noted. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">This was not helped by Trenco\u2019s closure in 2022: <\/span><span>Domestic tire manufacturer Trenco covered 30% of the internal market before it shut down production, Ahmed said. <\/span><span>At present, <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/www.pirelli.com\/tyres\/ar-eg\/contact-us\" style=\"\">Pirelli<\/a><\/span><span> and <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/pyramids-tires.com\/\" style=\"\">Pyramid Tires<\/a><\/span><span style=\"font-weight:400;\"> stand as the only tire manufacturers in Egypt, covering around 8.2% of domestic demand, he added. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">There\u2019s also <\/span><span style=\"font-weight:700\">the ripple effect of component company shutdowns: <\/span><span>Tire production was highly impacted by the closure of component manufacturing companies such as Kordsa, which used to provide nylon cords for tires. \u201cWe were forced to shut down as supply for tire production dropped and the MENA region's economy <\/span><span>crippled<\/span><span style=\"font-weight:400;\">\u201d stated former partner in Kordsa, Hossam Lasheen. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">\u2026Made worse by the FX crunch:<\/span><span style=\"\"> \u201c<\/span><span>Shortages in FX and tires are interrelated, t<\/span><span>he scarcity of hard currency has a significant impact on tire production,\u201d as it hinders the procurement of essential components required for tire assembly. As a result, the supply chain is disrupted, exacerbating the overall shortage of tires, <\/span><span>tire <\/span><span>engineer<\/span><span>ing company<\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/blackdonuts.com\/\" style=\"\">Black Donut<\/a><\/span><span style=\"font-weight:400;\">\u2019s sales representative, Ahmed Abou El Nasr told us.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">Logistics costs are not making it easier to produce the tires we actually make<\/span><span style=\"font-weight:700\">: <\/span><span>Logistics costs have been rising, especially as global <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.press\/stories\/2022\/07\/17\/youre-going-to-pay-more-more-at-the-pumps-again-75692\/\" style=\"\">fuel<\/a><\/span><span> prices spiked in 2022,<\/span><span style=\"font-weight:400;\"> Nasr told us. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">There\u2019s also the impact of trained labor shortages on product quality: <\/span><span style=\"font-weight:400;\">A shortage of trained labor is creating a knowledge gap and posing a significant challenge to our tire market,  said Ahmed. The industry requires a workforce with high levels of expertise to produce quality products, and the fact that the average age of workers at Trenco was 55 indicates the need for a younger, more competitive labor force.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">Import restrictions are making things worse: <\/span><span>The supply of imported tires decreased 20% <\/span><span>y-o-y<\/span><span> to 8 mn tires in FY2022, on the back of the <\/span><span>CBE\u2019S<\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.press\/stories\/2022\/02\/15\/importers-get-your-letters-of-credit-asap-64997\/\" style=\"\">decision<\/a><\/span><span style=\"font-weight:400;\"> last year to increase import restrictions by introducing letters of credit (L\/Cs) instead of the low-cost documentary collection process, said Ahmed. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">Demand remains high:<\/span><span>Demand for tires remains untouched by fluctuations in the macroeconomic climate, leaving consumers vulnerable to higher import prices, said Nasr. Prices for most <\/span><span>imp<\/span><span>orted tires increased more than 300% <\/span><span>y-o-y<\/span><span style=\"font-weight:400;\"> in FY2022, Ahmed told Enterprise. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">The bright side? We have an industry ripe for import substitution, and private and public companies are ready to step in. <\/span><span style=\"\">Several private companies and <\/span><span>the <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/www.aoi.org.eg\/en\/news\/a_national_industrial_alliance_to_produce_all_kinds_of_vehicle_tires,_in_partnership_between_the_business_sector,_military_production_and_arab_industrialization\" style=\"\">Arab Organization for Industrialization (AOI)<\/a><\/span><span> are eyeing tire production in Egypt, Nasr added<\/span><span style=\"\">. Also, American construction consulting firm <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/www.hillintl.com\/\" style=\"\">Hill International<\/a><\/span><span style=\"\"> and the AOI have signed a contract to manage a diverse tire factory. Meanwhile, there appears to be moves to incorporate tires as a domestic component in any incentives offered in Egypt\u2019s <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.press\/stories\/2023\/02\/16\/big-steps-forward-for-our-national-automotive-strategy-97061\/\" style=\"\">automotive strategy<\/a><\/span><span style=\"font-weight:400;\"> which aims to encourage local assembly of cars, Nasr Added. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">REMEMBER- <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;font-weight:700;\"><a href=\"https:\/\/enterprise.press\/issues\/2022\/10\/18\/am-a-five-step-recipe-to-boost-exports-fdi-and-make-sure-egypt-never-has-to-ask-the-imf-for-another-cent\/\" style=\"\">Reducing imports<\/a><\/span><span style=\"font-weight:700\"> is fundamental in shoring up FX reserves, and narrowing the current account deficit<\/span><span>, which <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.press\/stories\/2023\/02\/05\/current-account-deficit-narrows-20-in-1q-2022-23-95378\/\" style=\"\">narrowed<\/a><\/span><span> by 20% to USD 3.2 bn in 1Q2022-23, on the back of higher FDI and a jump in exports and tourism revenues. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">NEXT WEEK \u2014 We dive deeper into plans to change up the dynamics in the tire industry, <\/span><span>courtesy of the private sector and the AOI. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Egypt\u2019s tire industry is a far cry from fulfilling market demand<\/p>\n","protected":false},"featured_media":584582,"template":"","categories":[7334],"tags":[144,1548,633,7333,131,456],"class_list":["post-584581","inside_industry","type-inside_industry","status-publish","has-post-thumbnail","hentry","category-inside-industry","tag-automotive","tag-enterprise-inside-industry","tag-enterprisepm","tag-inside-industry","tag-manufacturing","tag-tires","wpautop","entry"],"acf":{"mongo_id":"f3553e3f-013a-4dc4-877c-7eb93afbaaf0","is_powered_by":false,"story_type":"2","photo_url":"https:\/\/ent.news\/2021\/12\/tires-1600.jpg","photo_position":"above","homepage_title":"","full_issue_title":"","related_issue":[584564],"teaser":"Egypt\u2019s tire industry is a far cry from fulfilling market demand","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2023\/4\/.95d3772b-e31b-45ca-86af-1045db2b76e8.mp3"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.1.1) - 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