Saturday,22 July, 2017
Current issue | Issue 1352, (13 - 19 July 2017)
Saturday,22 July, 2017
Issue 1352, (13 - 19 July 2017)

Ahram Weekly

Car sales slowing

Consecutive hikes in interest rates are adding to the reasons for the decline in car sales, reports Ahmed Ismail  

 

Sales of passenger cars fell by almost half compared to a year ago
Sales of passenger cars fell by almost half compared to a year ago

Car dealers in Egypt are expected to see sluggish demand for the rest of 2017 and a 50 per cent drop in sales, according to projections by the Automotive Information Council (AMIC).

Officials from the council attributed the decline to the fall in value of the pound together with the several increases in interest rates. Observers also believe that the recent rise in fuel prices by an average of 55 per cent will limit demand for passenger cars.

 Overall car sales dropped in April by 43 per cent to reach 9,551 compared to 16,779 during the same period last year.

Omar Balbaa, head of the automotive division of the Federation of Chambers of Commerce, said car sales had stagnated over the past six months since the floating of the pound. “The floatation raised car prices and created more financial burdens on many people, meaning that they stopped buying cars,” Balbaa said.

The AMIC said that the sales of passenger cars had dropped by 45.18 per cent in April to reach 6,331 compared to 11,549 during the same period the year before. Bus sales dropped by 44.5 per cent to reach 1,059 compared to a year earlier.

“The decision by the Central Bank of Egypt [CBE] to raise interest rates further discouraged customers from borrowing to buy cars,” Balbaa explained, adding that recent decisions by the CBE raising interest rates on deposits and loans would further compound already dormant cars sales.

The CBE has raised interest rates on deposits and loans three times since floating the pound in November 2016, seeing an overall seven per cent hike and reaching 18.85 per cent on loans and 19.75 per cent on deposits. The increases have been aimed at reducing the inflation rate in the last quarter of 2018 to between 10 and 16 per cent.

AMIC Spokesman Khaled Hosni said the car market was sluggish because of rising car prices resulting from the decline in value of the pound against the dollar. This was the case “even though many car dealerships have slashed prices,” he said.

Truck sales also dropped by 34.9 per cent in April with only 8,430 new trucks sold.

Car dealerships in Egypt are currently facing many challenges, according to Balbaa, including a fluctuating dollar rate on the customs charges used to calculate vehicle prices. “Dealers cannot give a precise price to customers until they deliver the vehicles, which makes some customers hesitate about buying a car,” he said.

“The customs dollar rate must remain fixed longer than one month so that sellers can give accurate prices to customers.” Minister of Finance Amr Al-Garhi decided at the end of last month to maintain a customs dollar rate of LE16.5 for one month starting on 1 June.

Balbaa said that fees charged on new cars were an added burden on Egyptian consumers and further impacted car sales. The government has submitted a draft law to parliament including amendments to Law 147/1984 adding such fees to increase state revenues, and this requires increasing new car fees to 1.5 per cent up to 1330cc, two per cent up to 1630cc, 2.25 per cent up to 2030cc and 2.5 per cent above 2030cc engines.

The amendments also call for raising private driver’s licence fees to LE300 for 10 years and a professional driver’s licence to LE200. An instructor or temporary motorcycle licence will be raised to LE100 with LE100 for replacements.

Overall, in the first five months of 2017 passenger car sales dropped 36.1 per cent to 15,100 units, according to AMIC statistics.


The writer is a freelance journalist.

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