Egyptian car importer and distributor Abaza Auto Trade has seen business slow down since the onset of the economic crisis. While their sales figures are nowhere near last year’s, the chairman of the company told Daily News Egypt that business has been picking up since this past March.
The company launched a car fair in Hurghada this month, which was held for the seventh time in Egypt and the first time in the Red Sea resort. The fair was divided into three sections for Skoda, Suzuki and a third for brands imported by the company as well as the trailer trucks they manufacture.
The Abaza family has been in the automotive industry for over 40 years. Mokhtar & Mohamed Mahfouz Abaza Company was established in 1967, importing several car brands.
In 1982, Mokhtar and Mohamed Abaza established Misr Co. for trailers and transportation, and eventually went on to manufacture semi-trailers under the brand Abaza-Langendorf.
Their auto trade arm became a joint stock company and relaunched as Abaza Auto Trade.
Daily News Egypt met with Mohamed M. Abaza, vice chairman and CEO of Abaza Auto Trade, to discuss their goal moving forward – making Abaza the number one in the industry in three year’s time – and their outlook on the market.
Daily News Egypt: Tell us a little about Abaza Auto Trade?
Mohamed M. Abaza: We are the authorized distributor for brands such as General Motors (Al-Mansour Automotive Co.), Hyundai, Skoda, VW Dogus Auto-JSC and Suzuki. We have a capital of LE 500 million and a paid-in capital of LE 83 million and own equity worth LE 100 million. We have a total work force of 1,250 people . and 14 distributors in Egypt, nine of them in Cairo.
Although , we don’t have big showrooms in Cairo – 60 percent of Abaza’s sales come from Cairo – we operate through distributors and they give us stability.
How did the financial crisis affect your business?
The last quarter of 2008 and the first quarter of 2009 have been very bad time for business, but things started getting better in March 2009. Of course, there is no comparison with last year’s figures.
In the first quarter of 2009, sales in Egypt’s auto market dropped between 37 to 40 percent, but we were able to keep our market share despite the decline.
Have there been any layoffs?
No. We have total of 1,250 employees and we are thinking of increasing this number.
How did the troubled US car market affect your business?
The problems of General Motors [in the United States], for example, affected the volumes of imports coming to Egypt. There are different models in demand on the Egyptian market which are not coming from GM US any more, and we try to cope with that by offering customers alternatives.
Because we are a certified dealer for certain GM brands from the US, we cannot import them from anywhere else. So what we are doing now is importing different kinds of GM cars or different brands altogether, with specs that match what Egyptian consumers are demanding.
These days, there is a boom in the automotive market and a boom in prices too. This started in April and we expect that by July and August, the market will be even better. Customers had put a hold on purchases because they expected prices to fall, but when it becomes obvious that prices are not going to fall anymore, customers readjusted their decisions.
What is your marketing strategy now?
I dropped some price to attractive levels, in some cases by LE 7,000. I also launched a promotion for Skoda, offering free full maintenance service for two years or 40,000 km. This was in January.
We had gotten 400 cars from one factory and so we implemented a marketing strategy because we couldn’t drop prices. In Egypt, the most attractive incentive for customers is the price; however we offer an alternative with more maintenance service.
Now we are targeting price cuts and thinking of ways to make this possible.
How the crises affect consumer behavior?
The buying movement slowed down. Customers were waiting for customs to reach zero in 2020, they misinterpreted the regulations, which held them back from making purchase decisions.
The cut will be the customs tariff, not car prices. For example, if a car is worth LE 200,000, the original tariff would have been LE 60,000; so a 10 percent tariff cut will bring that number down to LE 54,000.
What is the main challenge in your business now?
The new traffic law, particularly [the part that concerns] trailers.
(The new traffic law stipulates a ban on trailers within a couple of years, a decision that has come under fire and which trailer drivers and owners hope will be rescinded).
We manufacture trailers and have a market share of 51 percent in Egypt. We export to 12 Arab countries. In the new law, trailers are not allowed on the road and the government has given drivers and owners two years to adjust to the new law.
As a producer for trailers, we were among the first producers to adjust our designs to comply with the required criteria by the new law.
Cars prices around the world were affected by the financial crisis, but not in Egypt. What is the reason for this?
The problem is the agents, not the dealers. We have a limited profit margin we can’t go below it – if agents gave us better prices, we would lower prices for the end users. But this is not happening. However, Minister of Trade Rachid Mohamed Rachid’s policies are helping us [the dealers] cope with this problem.
What is the profit margin for cars agents?
It varies between 5 percent and 20 percent; it depends on the agent’s policy.
Will Egypt ever become a hub for car production?
If the Egyptian government gives enough incentives for establishing car manufacturing plants, the industry would flourish; if not by Egyptian businessmen then by foreign investors.
In other countries, the [business] atmosphere is encouraging, but in Egypt, unfortunately, the investor finds himself surrounded by obstacles.