Raouf Ghabbour, chairperson and managing director of GB Auto, said that it is unlikely for his company’s business to be impacted by the value-added tax (VAT) which is currently being discussed by the parliament. The reason is that the current car sales tax is almost equivalent to the proposed VAT tax of 14%.
In an investment report issued by GB Auto, of which Daily News Egypt obtained a copy, Ghabbour explained that the taxes on passenger car sales are 15%, 12% for cars serving the tourism sector, and 10% for commercial cars. The tax difference will be imposed on all car companies and the market will not be impacted by the price increase of nearly 4%.
Undersecretary of the parliament, Soliman Wahda, said that the VAT will be discussed during the parliament’s session on Sunday.
In terms of the car manufacturing strategy, Ghabbour expects the parliament to approve the strategy in the last quarter of 2016 or the first quarter of 2017, as it is currently occupied with a number of laws and decisions that top its priorities.
On the other hand, he revealed that the sales of Chery cars have reached 800 units monthly, which can increase the company’s market share, especially since the passenger car sector contributed to 53% of the company’s sales in the second quarter of the year, recording an annual growth of 30%.
“We believe that the sales market of imported cars that are fully manufactured abroad will achieve good rates during the third quarter in Egypt. However, sales will witness a slowdown in September because of the school season and Eid Al-Adha,” he said, adding that sales will witness some challenges in Iraq and Algeria.
The chairperson noted that GB Auto is taking a different direction than its competitors by utilising all available liquidity to support sales. Moreover, competitors do not have a stock of cars available.
Ghabbour stressed that his company has received support in provision of foreign exchange through the latest increase carried out last year worth EGP 960m. Part of it was in foreign exchange, worth EGP 30m.
He noted that banks have only provided 5% of the monetary needs of GB Auto during the second quarter, whereas the company resorted to the market to obtain the rest of its hard currency needs.
Ghabbour believes that consumers will need several weeks or months in order to adjust to the results of Egypt’s obtainment of the loan from the International Monetary Fund (IMF), worth EGP 12bn over three years after the expected decline of the exchange rate.
Ghabbour stressed that deals of technical and technological support for manufacturing motorcycles with Indian Bajaj have been concluded. The support includes engineering aspects. The company began manufacturing models of the Boxer 150 motorcycle.