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Increased fuel prices raise sales of small cars - Daily News Egypt

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Increased fuel prices raise sales of small cars

Egyptian market unqualified to receive electric cars, hybrids

For several years, the Egyptian government has taken steps toward economic reform. The most important of these steps is eliminating subsidies on some consumer goods, most prominently, fuel.

The ministry of petroleum and mineral resources announced the decision of the cabinet to increase the prices of petroleum products Last Friday. The price of 95 gasoline increased by 16% to EGP 9 instead of EGP 7.75, the price of 92 gasoline rose by 18.5% to EGP 8 instead of EGP 6.75 pounds, and the price of 80 gasoline increased to EGP 6.75, up from EGP 5.50, recording an increase of 22.7%. While the price of diesel increased to EGP 6.75 instead of EGP 5.50, an increase of 22.7%.

Natural gas was not exempted from the increase, as the price of a cubic metre of gas also rose to EGP 3.5 instead of EGP 2.75 pounds, an increase of 30%.

These increases in fuel prices have, in turn, been reflected in higher public and private transport prices, but will this drive the trend toward electric cars and hybrid cars? Or would the ideal alternative to escape the prices of gasoline be to convert cars to operate with natural gas? And would this affect the demand for conventional cars?

Noteworthy, Egypt has about 60 cars with clean energy, and the number of cars converted to work with natural gas instead of gasoline is 253,000 cars during fiscal year (FY) 2017/18. The cars are converted through 71 centres, and funded through 186 stations of the six companies working in the field across the governorates.

Khalid Saad, secretary general of the Association of Car Manufacturers, said that the Egyptian market is currently not ready to receive electric cars because of the lack of necessary infrastructure to operate them.

Moreover, the charging stations across the country are unable to accommodate a large number of environmentally-friendly cars, indicating that the client will go to them if charging stations and maintenance and spare part centres were available.

Saad added that this applies to hybrid cars as consumers have insufficient information about them. They are also not made available in reasonable quantities in the market.

He denounced that the solution would be to turn to converting cars to operate with natural gas, as the gas combustion inside the engine causes it to corrode and this disrupts the vehicle. He stressed that it is necessary that the engine is altered to accommodate natural gas.

Furthermore, he explained that the process of converting the car to work with gas is easy and inexpensive, but it will affect the life span of the engine, adding that there are some companies that produce cars equipped to operate with natural gas and gasoline together, and there are some Egyptian companies that import this type in small quantities.

Major General Hussein Mustafa, an auto industry expert, said it would be logical to drive electric vehicles and hybrid cars if the cost of operating the car increases, such as higher fuel prices, but the infrastructure in Egypt does not provide safety for electric cars and there are not enough cargo terminals.

Mustafa explained that hybrid cars contribute to saving fuel when driving in the city because they would operate in that case with an electric motor, while in the case of highways, they operate with their internal combustion engines.

He pointed out that the impact of high fuel prices lies in the tendency of a segment of users of medium cars to shift their attention to economic cars that consume less fuel, as the latter consume an amount of fuel ranging between five to six litres for each 100km, while medium consumption cars consume seven to eight litres of fuel for each 100km. 

Moreover, the rate of fuel consumption in cars has become one of the most important factors taken into account by consumers when they make the decision to buy a car, something that consumers of luxury cars do not do, he pointed out.

Mustafa expected the upcoming period to see more vehicles operating with natural gas as the most suitable solution for taxis and utility cars, but the demand for this would be much lower in passenger cars, even though this would save about 60% of the cost of fuel.

The use of natural gas is not dangerous because the gas inside the engine is very different from the gas in butane cylinders. It is lighter, which makes it safe. Additionally, gas cylinders are designed with safe materials Mustafa noted.

Additionally, Mustafa stressed that natural gas-powered cars are cars that have engines with high compression ratio, and this type of engine is found in most types of cars. 

He pointed out that the main drawbacks of the conversion of cars is the size of the gas cylinder placed inside the car trunk and its heavy weight which increases the car load.

For his part, Ali Tawfiq, a car expert and head of the Egyptian Auto Feeders Association (EAFA), denied that there is recession in the car market due to high fuel prices. Those who want to buy a car will not be hindered by any decision regarding the car market, but the fuel consumption factor will be taken into consideration by buyers.

Rising fuel prices also makes consumers ration car consumption.

Tawfiq added that this decision will not impact the trend toward electric cars, due to their high prices and the unavailability of spare parts and maintenance centres. This makes the purchase of an electric car currently difficult for Egyptian consumers, pointing to the need for agents to urge consumers to go to cars that operate with both fuel and electricity.

He expressed his disagreement with the trend to convert conventional cars to operate with natural gas, stressing the importance of natural gas in many industries such as the plastic industry. He also stressed the need to utilise natural gas in industries of a higher value instead of wasting it on cars.

On the other hand, Osama Abu Al-Magd, president of the Egyptian Automotive Dealers Association, said that the change in fuel prices has nothing to do with the selling and buying movement in the car market. The effect is likely to be limited to the purchase decision of medium-income consumers, as increased fuel prices will push them toward more economical cars of a capacity of less than 1600cc. He pointed out that the market has never been hit by previous fuel price increases.

He added that changing fuel prices is one of the steps of economic reform, which is taking place only after awareness campaigns for Egyptian consumers.

Furthermore, the devaluation of the dollar against the local currency is a testament to the success of the economic reform process carried out by President Abdel Fattah al-Sisi, he pointed out.

Abu Al-Magd explained that the decision to raise gasoline prices will not significantly affect the trend of the Egyptian consumers toward electric cars, especially since global markets are paying special attention to this type of car.

The problem is the lack of infrastructure in Egypt to receive environmentally-friendly cars. He added that the prices of electric cars are high, and their batteries cost a lot. Essentially, batteries represent 60% of the components of electric cars, noting that the deployment of electric cars appropriately will not appear before three years from now.

He said that the Egyptian government is doing all it can to take serious and effective steps toward spreading electric cars, as evidenced by the signing of joint agreements between the petrol stations affiliated to the armed forces and some companies specialised in the area of charging environment-friendly car batteries, stressing that the state pays great attention to this sector as it is the future .

The president of the Egyptian Automotive Dealers Association said that the automotive market is recovering, and activities of sale and purchase are returning. During the first five months of this year, 60,000 cars were sold, according to the reports of AMIC. Additionally, there was a large number of imported cars from agencies not registered in AMIC.

He explained that car sales in Egypt were able to achieve these figures even with the state of confusion witnessed by the market since the beginning of this year. This starts with the full implementation of the Egyptian-European partnership agreement, which prompted many consumers to postpone buying a car due to rumours about the high margin of agents, to the change in the value of US dollar against the local currency.

He added that car sales during the first five months of 2019 recorded a decrease of 4.8% compared to 63,000 sold cars in the same period last year. It was a slight decline in light of the conditions experienced by the market during the past period.

Abu Al-Magd pointed out that the third quarter (Q3) of this year is witnessing a reasonable sale and purchase rate. He said that the car market will likely see a noticeable state of stability during Q4 of the year. Car sales ranging between 170,000 to 180,000 are likely to be seen during 2019, which is a great number especially after the crises that hit the sector.

Gamal Askar, an expert in automotive and road engineering, gave some tips to ration fuel consumption when operating cars. This includes sticking to the specified speeds on each road, ranging between 100km-120km/hour, in addition to loading cars with proper weights and not going beyond a specific number of passengers and luggage inside the car trunk.

He also denounced the trend to use octane fuel to reduce fuel consumption as this would damage engines and increase pollution. He also advised against opening car windows when on high speeds because this might increase air resistance and affect fuel consumption.

Askar added that the most important factors that significantly contribute to reducing the consumption of fuel is changing the injection set regularly and carrying out periodic maintenance on the car by authorised service centres. He stressed the importance of observing the form of the car exhaust, because if it is black in colour, it is necessary to check the fuel sprinklers in the engine and change them if necessary, as this might be leading to higher fuel consumption.

He also strongly advised against installing bars on top of cars to carry luggage on them as this increases air resistance and fuel consumption. He also urged drivers to check the spark plugs of cars as not changing them for long periods also leads to higher fuel consumption.

It is also necessary to check the oxygen sensor on the exhaust pipe in case the light bulb is indicating there is a problem.

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