{"id":590256,"date":"2023-07-16T00:00:00","date_gmt":"2023-07-16T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/project-profile-a-new-specialized-manufacturing-zone-in-east-port-said-designed-to-develop-egypts-automotive-industry\/"},"modified":"2023-07-16T00:00:00","modified_gmt":"2023-07-16T00:00:00","slug":"project-profile-a-new-specialized-manufacturing-zone-in-east-port-said-designed-to-develop-egypts-automotive-industry","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/project-profile-a-new-specialized-manufacturing-zone-in-east-port-said-designed-to-develop-egypts-automotive-industry\/","title":{"rendered":"Project profile: A new specialized manufacturing zone in East Port Said designed to develop Egypt\u2019s automotive industry"},"content":{"rendered":"

<\/span>How the new East Port Said Automotive Zone is being set up to spur the development of<\/span> Egypt\u2019s automotive industry:<\/span> As Egypt works to develop its automotive industry, we\u2019re 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\u2019s 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\u2019s automotive industry can move up the value chain. <\/span><\/p>\n

REMEMBER-<\/span> Last month, a delegation of automotive and automotive components producers<\/span>attended a meeting<\/a><\/span> 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. <\/span><\/p>\n

The automotive industry is like a \u201cmagnet\u201d for feeding industries:<\/span> Creating a real<\/span> automotive industry \u201cisn\u2019t just about the factory that assembles vehicles. It\u2019s about all the feeding industries that provide all sorts of components \u2014 wiring, harnesses, seats, dashboard glass, interior carpeting, tires, etc.,\u201d Abdel Wahab said. <\/span><\/p>\n

Scale is the biggest driver of the industry:<\/span> It\u2019s difficult to attract new manufacturers in these<\/span> feeding industries unless there is market and volume, he said. \u201cA couple thousand cars per year is not enough in terms of volume \u2014 but if you\u2019re talking about 100k cars, that means 400k tires, for example. Now we\u2019re talking. Now you can seek out international manufacturers to bring to Egypt.\u201d<\/span><\/p>\n

That\u2019s part of where EPAZ comes in:<\/span> \u201cOur vision is if we start with three original equipment<\/span> 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,\u201d Abdel Wahab said. <\/span><\/p>\n

Making the economics work:<\/span> To establish factories of the same scale as ones in major<\/span> automotive-producing markets like Morocco, it would cost at least USD 1 bn, Abdel Wahab said. \u201cThis 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\u2019re looking at setting up a shared facility with these lines for more than one manufacturer to use,\u201d he said. This shared facility would require some USD 500 mn in investments, he told us.<\/span><\/p>\n

Critically, the zone\u2019s location will help make operations efficient for manufacturers:<\/span> As<\/span> manufacturers will naturally rely on imported components to a certain degree, East Port Said\u2019s 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\u2019s East Port Said Port <\/span>being developed<\/a><\/span> by Bollor\u00e9, 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. <\/span><\/p>\n

Manufacturers setting up shop at EPAZ will have access to a handful of incentives \u2014 but<\/span> with prerequisites:<\/span> 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\u2019 incentives will be assessed on how much value they\u2019re 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. <\/span><\/p>\n

Investors will also get tiered incentives depending on the degree of environmental<\/span> compliance<\/span>, which will be based <\/span>on Euro standards<\/a><\/span> \u2014 lower carbon emissions will yield larger incentives. \u201cThe incentives are designed to encourage manufacturers to address the four pillars in their activity. They\u2019ll 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,\u201d Abdel Wahab said.<\/span><\/p>\n

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