Wednesday,13 December, 2017
Current issue | Issue 1288, (24 - 30 March 2016)
Wednesday,13 December, 2017
Issue 1288, (24 - 30 March 2016)

Ahram Weekly

Car concerns

Participants at this week’s Automech International Motor Show in Cairo explained their concerns about exchange-rate instability to Stefan Weichert

Car concerns
Car concerns
Al-Ahram Weekly

It was supposed to be a big celebration, with several new cars being introduced to the Egyptian market. But the recent devaluation of the Egyptian pound cast a shadow over Automech, the 23rd Cairo International Motor Show held this week.

Just three days before the inauguration of the event, the Central Bank of Egypt devalued the pound by almost 14 per cent, putting the price of the dollar at LE8.95. For car dealers, this means re-pricing their cars amidst uncertainty about the direction of the exchange rate. 

“We need to re-price all our cars,” said Mohamed Younis, chairman of Modern Motors Suzuki Egypt. He explained that car sales had slowed down in 2016, with the decline, which he put at around 40 per cent, being largely due to instability in the dollar exchange rate and the subsequent instability of prices.

However, Younis expressed the hope that the recent devaluation will make the currency more stable and that the Automech Show will be the “push the market needs”. “We need a steady currency. All being well, it is this that is happening now,” he said.

Mohamed Ehab, regional marketing manager for North Africa at Nissan, expressed the same hope, but expected to see sales in 2016 end up at the same level as in 2015, which was lower than 2014 and 2013.

Ehab said that it is not only pricing that is worrisome, but also the delivery times on sold cars as the scarcity of dollars has made it hard to pay for imported cars on a steady schedule. “Deliveries can now be soon, or they can take up to several months,” he explained.

Heidi Orpin, a senior communications manager at Renault, told Al-Ahram Weekly that the delivery of cars sometimes takes up to four months, according to waiting lists. “We really hope to see some stabilisation in the market that has been hard hit,” Orpin said.

The ongoing dollar crisis has been a fact of life for the past four years. In December 2012, the price of a dollar was around LE6, after which the pound depreciated in value in 2013, 2015 and 2016.

Unstable exchange rates have also affected the sale of used cars because the automotive sector has imported limited new cars in this period, making people keep their old cars for longer. According to some dealers, this has pushed used-car prices up by 30 to 40 per cent compared to last year.

Furthermore, the devaluation is also affecting the prices of imported spare parts as the decision to increase customs on imports, coupled with the hike in dollar, has had an inevitable effect on prices.

The chairman of an Egyptian company that imports and sells car parts told the Weekly that the instability of the exchange rate is making it impossible to predict the real exchange rate of the dollar and that this is making pricing decisions impossible.

The company also has problems getting spare parts on time. “It affects my decisions to import or not. I am afraid of buying anything at the moment, and I haven’t bought anything in 2016. We are really suffering. Two of our shipments are in the ports, but we are not allowed to get them. There are delays on everything at the moment,” he said.

The company lost 40 per cent of its sales last year, and it expects something in the same region this year, he added. “We can hardly survive. We just hope that the devaluation will reduce the gap between the official and the black market rate, so we can get some stability.”

One car importer, talking on condition of anonymity, said that currency instability is a problem for many countries, but that in the Egyptian case there are also restrictions on imports, adding to the problem.

But many potential buyers at Automech said that the increases in prices will not affect their buying decisions.

“Of course, cars are more expensive now, but they were going to increase anyway,” said Ahmed Mussa, who is considering his options.

According to Moghdar Mohamed, another customer, “We need a car for our new business, so we can’t wait to see what happens to prices. The dollar exchange rate won’t change our needs. It just makes them more expensive.”

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