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Car market expected to lose 40% of sales in H1 2017 - Daily News Egypt

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Car market expected to lose 40% of sales in H1 2017

Companies being forced to import 2018 models will likely raise prices further

Workers and officials of the automotive market expected sales to continue staying low in the first half of 2017. They predict sales to be as much as 40% lower than during the same period in 2016 as a result of the recession that hit the sales in the first quarter of the current year.

A senior source involved in the market told Daily News Egypt that companies are now selling the stock that has been piling up, which came after a decline in sales over the course of the past four months. He noted that pricing now is determined based on the cost of imports expected in the coming period.

The source said that most cars will see their prices hike further in the coming few months, explaining that the companies have to import 2018 models, which would mean higher costs and record-high prices, something that would increase the recession.

He explained that the companies will also be forced to lower their prices or offer discounts in the second half of 2017 to sell the stock of their 2016 and 2017 models and offset the losses by increasing the price of the 2018 models.

The source said that sales are expected to decrease in 2017 to approach 40% compared to sales of last year, especially as the USD price at customs has moved back up again.

Khaled Saad, the general manager of Brilliance in Egypt, said that overall sales dropped by 40% in the past two months compared to the same period in 2016. He expected the market to close at a 30-40% decline in sales at the end of the year.

Alaa El-Saba, member of the automotive division at the Federation of Egyptian Chambers of Commerce and head of El-Saba Automotive, said that sales could dip as low as 50,000 to 55,000 sold cars by the end of the first half of 2017, attributing the decline to the lowered purchasing power of clients.

He added that many dealerships and manufacturers expressed their resentment about the market in the coming period, noting that many companies decided to repatriate their profits and not invest them in the local market.

Moreover, El-Saba urged officials to reconsider the banking decisions to increase the ability to finance the purchase of cars, especially as most sales are conducted on instalments rather than cash payments.

He added that carmakers have already lowered their profit margins by 3-5% in a bid to stimulate sales.

In February, most companies have offered discounts on several models, after the recession that took over the market.

The price cuts were supported by a lowered USD rate at customs in the first half of March. But the situation quickly turned when the Ministry of Finance announced increasing the rate, which prompted companies to raise their prices again.

In the wake of this volatility, observers ask the question of whether the market will be able to resist the losses or succumb and collapse.

Meanwhile, the sales of cars dropped 60% in the first two months of 2017 compared to the same period in 2016. The market saw sales of 6,530 units only, versus 16,527 units, according to the Automotive Marketing Information Council (AMIC).

A recent AMIC report indicated a decline in the demand on passenger cars by 59%, recording sales of 4,762 only, down from 11,487 in February 2016.

Sales of buses dropped 59.4% to record 925 sold in February 2017, down from 2,287 units in the same month of 2016. Truck sales also declined by 69.5%, where February saw sales of 843, versus 2,762 in February 2016.

Egyptian Automotive Dealers Association chairperson Osama Aboul Maged said that the drop in sales was caused by the price hikes over the past eight months, as they doubled at the beginning of 2017. He noted that the discounts dealers offered were fruitless.

He predicted sales to continue to be low as the exchange rate settled at EGP 18 to the dollar, which will keep prices at the same level.

AMIC’s report stated that sales dropped since the beginning of the year and until the end of February by 50.1%, registering sales of 15,936 units in that period, compared to 31,918 units in 2016. Passenger car sales alone dropped by 45%, registering 11,701 units only, down from 21,151 units in the same period.

Meanwhile, the locally assembled busses saw 58% less sales, at 1,850 busses, compared to 4,355 busses in January and February 2016. Truck sales also dropped by 63%, to reach 2,385 units, down from 6,412 units during the period of comparison.

Furthermore, the report stated that the demand on locally assembled cars declined by 50.2% to settle at 7,648 units in February, compared to 15,361 units in February 2016. Imported cars sales also dropped by 49.9% to 8,288 units, down from 16,557 in the period of 2016.

Locally assembled passenger cars sales dropped by 45.6% to 4,402 cars, compared to 8,096 units, while imported passenger cars dropped by 44.1% to 7,299 units, versus 13,055 units.

Sales of locally assembled busses dropped by 47.6% to 1,242 in February 2017, compared to 2,372 units in the same month of 2016, while imported buses sales dropped by 69.3% to 608 busses, down from 1,983 busses.

Additionally, locally assembled trucks saw 59% less sales in February 2017, settling at 2,004 sold trucks, down from 4,893 trucks in the same month last year. Imported trucks’ sales also declined by 74.9% to 381 trucks sold in February, compared to 1,519 units in the same period last year.

Topics: car market Sales

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