The Egyptian car market witnessed a clear change in the pricing of Turkish cars, after activating the last stage of the Free Trade agreement with Turkey, under which all products exchanged between the two countries shall be free of customs. So, all imported cars from Turkey became completely exempted from customs which revived the sales movement in the local market. But this was not the case for the local feeder industries, as Turkey does not import any of its car components from Egypt.
Hence, the Free Trade deal was no use for the feeder industries, the main driver of the localization of automotive industry.
Deputy Chairperson of the Chamber of Engineering Industries at the Federation of Egyptian Industries (FEI), Abdel Moneim El-Qady, said there is no positive effect from the agreement on feeder industries, since Turkish cars do not rely on Egyptian raw materials.
Moreover, he believes that Egyptian automotive assembly companies prefer Chinese products over Turkish, due to their higher quality and lower prices. Therefore, the agreement will not benefit this sector as well.
The deal reduced the price difference between imported cars and locally assembled ones which are subject to 40% customs. It increases the difficulty of market competition, adding to the burden of local assembly companies which will be forced to lower their prices.
El-Qady explained that feeder industries supply their production to local assembly companies, while spare parts come second in terms of priority. As for exporting, it is still difficult without incentives that help that local industry to compete globally, similar to the Tunisian experience.
In Tunisia, the government obligated car importers to rely on local spare parts, which boosted the feeder industries significantly.
In a related context, Ali Tawfik, head of the Federation of Feeder Industries, said China is the main supplier of cars, auto components, and spare parts, however importing from Turkey has several advantages, the most important of which is its geographical proximity. Therefore, shipping Turkish products to Egypt takes only four days, unlike Chinese shipments that take more than 30 days to reach the Egyptian ports.
Tawfik noted that if Turkish car makers used Egypt-made auto, this would contribute positively to the recovery of local feeder industries, especially following the Free Trade deal.
However, it is difficult to export local auto components to Turkey as they have more advanced feeder industries. Turkey exports approximately 1m cars annually, and production costs there are lower than in Egypt because of the huge production volume.
Tawfik proposed signing cooperation contracts between Turkish and Egyptian auto companies to benefit from the deal, as some industries to be assigned to Egyptian companies and others to Turkish ones based on product quality and operating cost.
Such steps can create an integrated system between the two countries which will reflect on the quality of the final products and their prices.
Egypt cannot compete with Turkey in terms of final products, as the Egyptian industry suffer more difficult challenges than Turkey, such as high interest rates and transportation costs.
Tawfik pointed out that the feeder industries companies formed a committee to set unified specifications for auto components and spare parts, such as brakes and glass. Those specifications are ready, but they have not been issued yet.
He called lawmakers and market leaders to set clear specifications of imported cars, so that importers could refrain from bringing low-quality products that lack international safety standards, which may cause traffic accidents or increase pollution.
There should be laboratories to examine imported auto products to ensure their suitability for local use.