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Interest rates stir new wave across auto market - Daily News Egypt

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Interest rates stir new wave across auto market

70% of sales depends on loans, demand on used cars increased 


Car companies expected a new drop in sales due to the pressure from the Central Bank of Egypt’s (CBE) decision to raise the benchmark interest rate for the second time in less than two months.

A member of the board of directors of the Bavarian Automotive Group and the general manager of Brilliance Egypt, Khalid Saad, said that the decision of the CBE to raise the interest rate on deposits and loans by 2% is in favour of the citizen who depends on that interest and does not have direct investments in the local market.

Nevertheless, the decision will not serve the investment inflow, especially in the auto sector, which hasn’t even recovered yet from the similar interest hike decision in May only to be hit again.

He pointed out that the people wishing to invest would prefer to do so in banks rather that in risky projects.
In addition, Saad revealed that the 70% of car sales are mainly fuelled by loans, where only 30% of sales are made in cash purchases.

Moreover, he predicted that the decision to raise the interest rate will be followed by a decline in car sales more than the current rates. The customer who resorts to borrowing does not already have the necessary financial resources to qualify for direct payments, thus increasing the interest will limit the number of customers.

Meanwhile Osama Aboul Magd, president of the Association of Car Dealers, expressed his deep concern about the impact of the decision to raise interest rates on the auto sector, especially with the subsequent decline in sales following the pound flotation.

He added that the sector has not yet recovered from the consecutive increases in car prices as a result of the rise in the exchange rate and fuel prices. Aboul Magd called for the provision of soft loans for those wishing to buy cars without loading the new interest, which he believes will hit the sector and increase the suffering more than it already is.

Citizens could no longer afford to buy new cars, and the alternative was to resort to second-hand ones that did not revive trade, such as buying and licensing a new car, according to Aboul Magd.

Ahmed Al-Gookh, director of Ezz Motors, agreed that raising interest rates on lending would curb the sales of cars that rely on bank loans, but expected sales to rebound in the coming year for cars that are paid by cash.

Al-Gokh believes that the decision will lead to a majority of customers resorting to the second-hand market in the coming year.

Car sales fell 28.8% in 2016 (when 198,300 units where sold) in comparison to 2015 (when the market saw the sales of 278,000 units).
The demand for private units fell by 27%, recording 141,900 vehicles, compared to 195,500 cars by the end of December 2015.

Bus sales fell by 35% in 2016, when 21,200 units were sold as compared to 32,500 units a year earlier, and the sale of lorries fell 30% to 35,000, compared to 50,000 lorries in 2015.

According to the Automotive Marketing Information Council (AMIC) report, sales from the beginning of 2017 to the end of April 2017 fell by 45.7% to 36,098 units compared with 66,434 units in the corresponding period of 2016.

Private cars sales fell by 42% to 26,035 vehicles, compared with 44,930 cars.

Bus sales fell 52% to 4,014 buses versus 8,449 units during the first four months of 2017 and 2016 respectively.

Lorry sales fell by 54% to 6,049 units versus 13,055 lorries.
The ddemand for locally assembled cars fell by 43.1% to 18,893 units from the beginning of 2017 to April 2017, compared to 33,198 units in January 2016 to the end of April 2016. Imports also fell by 48.2% to 17,205 vehicles, compared with 33,236 vehicles during the period of comparison.

Local car sales decreased 36.9% to 11,384 vehicles, compared to 18,036 vehicles. Sales of imported passenger cars dropped 45.5% to 14,651 vehicles versus 26,894 vehicles.

Local bus sales declines 47.6% to 1,242 compared to 2,372 buses, while sales of imported buses decreased by 69.3% to record 608 buses compared to 1,983 buses.

Domestic lorry sales recorded a decrease of 55.8% to 2,074 compared to 4,697 lorries, while imported lorry sales decreased by 48.3% to 1,940 sold by the end of April 2017 compared to 3,752 units by the end of April 2016.

Chevrolet topped the top 10 bestselling brands in the Egyptian market in April 2017, after acquiring 29% of sales and sold 2,748 cars compared to 3,569 cars in April 2016.

While Nissan came in second place with 1,425 sales, accounting for 15% of total sales. Hyundai finished third with 1,384 vehicles, accounting for 14%.

Toyota achieved sales of 858 vehicles, ranking fourth with 9% of the market. Mitsubishi came in the fifth place with 548 units with a 6% acquisition, followed by Renault at 496 with a 5% share of car sales during April 2017.

Chery was ranked seventh, with 410 units sold—and with 309 units sold, Opel come in eighth place. Mercedes sold 310 units, putting it in ninth place, and Suzuki sold 229 units to come in the tenth position.

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