{"id":660275,"date":"2025-02-09T00:00:00","date_gmt":"2025-02-09T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/auto-industry-expected-to-continue-recovery-into-2025-fitch-solutions-bmi-says\/"},"modified":"2025-02-09T00:00:00","modified_gmt":"2025-02-09T00:00:00","slug":"auto-industry-expected-to-continue-recovery-into-2025-fitch-solutions-bmi-says","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/auto-industry-expected-to-continue-recovery-into-2025-fitch-solutions-bmi-says\/","title":{"rendered":"Auto industry expected to continue recovery into 2025, Fitch Solutions\u2019 BMI says"},"content":{"rendered":"

Egypt\u2019s auto market is finding its footing after a bruising currency <\/strong>crisis<\/strong>, with early signs of a pickup in passenger car sales despite inflation\u2019s impact on consumer budgets, according to Fitch Solutions\u2019 research unit BMI\u2019s 1Q 2025 Auto Report<\/a>.<\/p>\n

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A sales recovery in the making?<\/strong> 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%.<\/p>\n

Driving the growth:<\/strong> BMI\u2019s outlook hinges on critical FX inflows from the USD 35 bn Ras El<\/a>Hekma<\/a> agreement, as well as our expanded USD 8 bn IMF program<\/a> agreement, which has unlocked vital funds and eased balance-of-payment pressures.<\/p>\n

Egypt could be set to see passenger car sales growth this year: <\/strong>BMI is \u201ccautiously optimistic\u201d about a continued recovery of the passenger car market in 2025, which could see sales recover as sustained falls in inflation bolster households\u2019 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.<\/p>\n

Commercial vehicle market eyes recovery, but cost pressures loom: <\/strong>Egypt\u2019s 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\u2019s 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 \u2014 particularly the New Administrative Capital \u2014 provide one source of optimism for the commercial vehicle sales sector, with BMI noting that such projects could boost demand for commercial transport.<\/p>\n

Inflation remains the key factor<\/strong> to watch with regard to the sector\u2019s broader recovery<\/strong>, with annual headline urban inflation dropping to 24.1%<\/a> in December \u2014 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\u2019s 5-9% target range in the near future, tempering the pace of a market recovery.<\/p>\n

Public transport could be a springboard for EV growth: <\/strong>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\u2019s 2022 plan to transition all public buses to gas or electric by 2027, backed by a World Bank-supported push<\/a> 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.<\/p>\n

Despite this, BMI expects Egypt\u2019s EV market to expand, fueled by state-backed <\/strong>subsidies, tax breaks, and golden licenses.<\/strong> 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.<\/p>\n

The private sector has indeed been helping out with the e-bus transition:<\/strong> Kastour Egypt has begun assembling Foton\u2019s electric buses<\/a>, while El Nasr Automotive has rolled out its first batch<\/a> of e-buses in partnership with China\u2019s Yutong. Chinese automaker Jinbei is also set to start local assembly this year<\/a>. Meanwhile, Volvo and MCV are building e-buses for export to Europe<\/a> with at least 50% local components.<\/p>\n

Egypt remains a regional underperformer in BMI\u2019s Auto Sales Risk\/Reward Index<\/strong>, 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\u2019s potential for automotive retail operations is bolstered by its market size and gradual economic stabilization.<\/p>\n

According to BMI\u2019s methodology, Egypt ranks 2nd in MENA and 43rd globally for auto <\/strong>production<\/strong>, 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\u2019s strategic location as a gateway to African markets and growing government support could drive long-term investment and industry growth, BMI writes.<\/p>\n

Regulatory developments also got the nod: <\/strong>The report mentioned the formulation of a new<\/a>Finance Ministry unit<\/a> 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.<\/p>\n

Remember: <\/strong>The Madbouly government has been working to localize the auto industry, introducing the Egyptian Automotive Industry Development Program<\/a> 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\u2019s existing assembly and manufacturing capabilities \u2014 and encouraging new investment to the sector.<\/p>\n

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