Sunday,17 December, 2017
Current issue | Issue 1149, 23 - 29 May 2013
Sunday,17 December, 2017
Issue 1149, 23 - 29 May 2013

Ahram Weekly

Comeback car

Re-launching the once iconic Al-Nasr Company will not be without challenges, Mona El-Fiqi reports

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Al-Ahram Weekly

For decades almost the only car brand available on the Egyptian market was the Italian made Al-Nasr, of the Al-Nasr Automotive Manufacturing Company. Egyptians would have to book the cars years in advance if they had any hope of getting one. Production lines could not meet the growing demand. But when imports began, the company vanished into oblivion. Today the government wants to put the company back in business. In fact, officials are optimistic that resuming operations of the state-owned company under the auspices of the Ministry of Military Production would be a boost to the automotives sector and could realise the ago-old dream of producing an Egyptian car. However, experts argue that a clear strategy for production and available markets in addition to a huge flow of foreign investments is needed to help Al-Nasr come back to life.

The company had been slated for liquidation when the Egyptian cabinet decided in February to halt the process and plans were drawn up to re-launch the firm.

Al-Nasr Company was founded in 1960 as the first car production company in the Middle East. It specialised in assembling Italian Fiat cars. It also produced the famous budget car Shahin, a hybrid of the Turkish model of Fiat. Fiat and Shahin were the preferred choices for Egyptians for decades. Years passed and the design of cars assembled by Al-Nasr was not modified and the competition became tougher because of imported cars. Moreover, the company’s financial status deteriorated as was the majority of public sector companies. As a result, the company stopped production in 2009 and its labour force was reduced from 4,000 to the current 234 employees. The government sought to liquidate the firm after its debts reached almost LE2 billion in 2009. But a few months ago the government started to take measures to boost the local industrial sector. One of these decisions was to re-operate some of the giant industrial plants like Al-Nasr Company and the Steel and Iron Complex in Helwan to benefit from their huge production potential. Officials decided that the Military Production Ministry would take responsibility for Al-Nasr and would provide financial and technical assistance while applying strict military administrative regulations hoping that it would allow the company to once more flourish.

On a recent visit to the plant Reda Hafez, minister of Military Production, highlighted the possibility of re-operating Al-Nasr Automotive, saying the company has the ability to begin operations immediately. Hafez announced that he sent a memo to the Ministry of Investment stating that Military Production is ready to operate Al-Nasr Company after its financial position is revised. “The resumption of production at Al-Nasr factory will definitely boost Egypt’s industry and will be vital to its economy,” said Hafez.

Hafez added that his ministry intended to introduce highly qualified specialists from the military production factories to guarantee that Al-Nasr would operate its four factories at full capacity.

The company’s employees are optimistic since re-operating has many advantages for them and the local market. Nabil Sayed, manager of one of Al-Nasr Company’s service centres, said it will help provide job opportunities. Sayed said the company’s workers, even those who quit, were optimistic about the company resuming operations. “I receive many phone calls daily from workers who want to apply for jobs when the company starts production,” said Sayed. He said the company’s production will help realise a balance in prices in the local market. The unavailability of a local product always leads importers to control the market, according to Sayed. “Re-opening the company would benefit Egyptian consumers who will be given the chance to choose the best product and the suitable price according to their needs,” said Sayed. Though the company stopped production many years ago, Al-Nasr still enjoys a good reputation in the local market. The Fiat and Shahin models which were produced by the company, were preferred by consumers for being heavy duty and for their reasonable price, according to Sayed.

The decision to re-operate Al-Nasr Company was generally praised by experts but some criticised officials for having rosy expectations. “The idea of re-launching the company is good because it has great potential,” Adel Gazareen, former chairman of Al-Nasr Company, told Al-Ahram Weekly. “For example, one of its four factories which was specialised in car assembling, covers 40,000 square metres with all the needed machinery.” However, Gazareen said that it was unrealistic that the minister of Military Production declared that the company would be able to produce a 100 per cent Egyptian car since no country worldwide produces a car locally. “If we are able to produce 80 per cent of a car locally, it would be a great success,” Gazareen explained.

Even 80 per cent, according to Gazareen, could not be done by Al-Nasr alone but should be a joint effort with a number of private sector feeder companies that produce, for example, items like seats, electricity circuits and window glass.

The problem, according to Gazareen, is the need for big investments to restructure the company, upgrade its machinery, train its current labour and hire well-qualified workers. Car production is a heavy industry and since the government would not be able to inject such flows of investments, Gazareen believes that officials should find a giant foreign investor as a partner to take over at least 30 per cent of the company’s shares to guarantee transferring the know-how to Egypt.

Moreover, there are many steps that should be taken into consideration before the company restarts. The establishment of a higher institute for vehicle engineering and an institute for car engineering research was recommended by Gazareen since they will provide the local market with new graduates of qualified car designers and high-calibre technicians. Gazareen explained that though Ain Shams and Helwan universities have departments for cars engineering, they are not enough because car technology is rapidly changing “and needs to be upgraded all the time”. As for the technology to be followed when re-operating Al-Nasr Company, varying views are being analysed. Both ministries of military production and investment are currently looking for a foreign partner with suitable technology. The Ministry of Military Production received proposals from France, China, India, Italy and Malaysia in addition to a Russian offer which is expected to be presented soon. Russian officials during President Morsi’s recent visit to Russia underlined their desire to participate in upgrading the company. A Russian delegation is expected to visit the plant this month to conduct a feasibility study to discover methods of upgrading the company’s factories.

However, Gazareen said he did not prefer Russian participation in producing vehicles “since their technology is not of a high quality” and that it would be better if they help Egypt produce agricultural trucks in which they are knowledgeable.

For technical assistance, Sayed explained it would be better to use European technology since it matches the company’s machinery. For years, Al-Nasr used Italian technology in assembling cars. Moreover, it would help to reduce the costs of re-operating the company’s production lines.

Marketing should not be forgotten before re-launching the company so experts asserted the importance of conducting a comprehensive study for the local market. Mokhtar Al-Sherif, a professor of economics at Al-Azhar University, said that such a study is needed to ensure that the local market would absorb the company’s expected production. He said the availability of after sale services was an important element. Total Egyptian annual consumption of cars is expected to reach 150,000 by the end of 2013 and is expected to reach 400,000 cars within the next few years. Egypt is currently assembling 50,000 cars annually by 12 companies, a modest figure compared to other countries such as Morocco which produces 420,000 cars annually, according to Gazareen. The government should boost the company’s production to a larger scale to cover local market needs as well as exports since the market can be expanded to include exports to Arab countries and countries that Egypt enjoys trade agreements with such as those found in the Common Market for Eastern and Southern Africa (COMESA). However, Al-Sherif warned that if cars assembled by Al-Nasr are to be exported, the quality should be of a high standard to compete with foreign markets.

Box

AL-NASR Automotive Manufacturing Company is a state-owned firm founded in 1960 in Helwan as part of the general industrialisation process Egypt experienced after the 1952 Revolution. The first firm for car assembly in the Middle East, Al-Nasr was intended to provide affordable cars but remained expensive for the majority of Egyptians.

The company focussed on assembling foreign licensed cars under its brand to avoid the engineering and design problems associated with previous attempts at domestic car manufacturing. But the company also expanded production to include agricultural trucks.

Al-Nasr’s top selling model was the 128, of which worn out versions can still be seen running on Egyptian streets. The company’s more modern creations were the Regata, Dogan and Shahin, also variations of Fiat models.

 

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