In the wake of the Central Bank of Egypt’s (CBE) decision to liberate the exchange rate, opinions of workers in the automotive sector are varied as the impact of this decision on the sector is yet to be seen.
Some believe that this decision was long awaited and will eliminate the recent overpricing phenomenon on the part of car merchants, even if it results in the increase of official auto prices. But some dealers have expressed a deep fear of the negative impact of the decision on the market, causing consumers to refrain from purchasing cars.
Waleed Abo Greisha, head of the Abo Greisha car showroom, said that the CBE’s decision to liberalise the Egyptian pound’s exchange rate may lead to an increase in the official prices of imported cars due to higher customs fees; however, once the necessary currency for importing is available, cars will again be available in showrooms.
Abo Greisha explained that this increased availability of cars will limit the overpricing phenomenon. The customer bears this fictional price difference imposed by merchants on the official price set by agents and companies—cars have been overpriced by more than EGP 100,000 in some cases.
Abo Greisha supports the CBE’s decision. “The decision serves everybody and restores the market’s vitality,” he said, noting that the flotation decision is a striking blow to car monopolists who want to continue overpricing cars in the Egyptian market.
Customs on imported cars have increased by 52% as a result of the CBE’s decision.
Sayed Galal, owner of Galal Motors Showroom, agrees with Abo Greisha, stressing that the sector was on the brink of collapse due to the domination of tycoons and currency owners over the sector.
“It is about time for the Egyptian market to recover, with more attention paid to local manufacturing and the return of companies that suspended their plans for local production, like Brilliance. These companies will serve the Egyptian market with the CBE and provide the foreign currency necessary for local manufacturing companies to purchase the required equipment,” Galal said.
Galal said the decision will benefit everyone in the car sector and will have a positive impact on citizens, pointing out that the campaigns to intimidate people about price increases is merely temporary.
Galal noted that official prices may be increased due to higher customs fees but they will decline following the immediate delivery of cars to customers as a result of eliminating the overpricing phenomenon.
“An example is a car with the official price of EGP 200,000 which is sold to customers with immediate delivery for EGP 280,000. This is known as overpricing. Dealers resort to this as a result of scarce supplies of cars in the market,” Galal explained.
He went on to explain that increasing the official price of this car, for example from EGP 230,000-240,000, as a result of the availability of foreign currency will eliminate the overpricing phenomenon, without forcing customers to reluctantly purchase the car for EGP 280,000.
On the other hand, Osama Aboul Maged, head of the Egyptian Automotive Dealers Association, is concerned about the potential impact of the CBE’s decision on the car sector, stressing that the decision will cause car prices to rise even higher than they are now.
He attributed his fear to the expected leap of car prices due to higher customs fees calculated according to the new dollar exchange rate. He denied that the association has forced a halt in sales inside showrooms, noting that it is up to each dealer to decide.
Mahmoud El-Wakeel, owner of Paradise car showroom, condemned the flotation decision.
El-Wakeel fears that dealers will refrain from selling cars over the upcoming period due to the unclear vision for car prices—new prices are set to be announced by companies soon.
Ahmed El-Goukh, chairperson of Ezz Motors car showroom, said that the past seven months were unclear for the auto sector and prices were changing on a daily basis.
“No matter the impact of the CBE’s decision, the sector will at least witness a state of stability instead of the constant changes and confusion among dealers and customers over the past period,” El-Goukh said. He demanded that the door for imports be opened through the availability of foreign currency in order to increase the supply of cars, and individual price differences to be eliminated which have resulted in frustration for customers and caused a decline in sales.