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Car licensing suspension to paralyse automotive sector: pundits - Daily News Egypt

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Car licensing suspension to paralyse automotive sector: pundits

Auto dealers ask CBE to exempt them from decision to disburse car loans

The negative repercussions of the coronavirus, which turned the world upside down, continues and more countries take preventive steps to curb further virus spread.

The Egyptian government began taking many precautions to limit the spread of the virus which became a new challenge in front of the car market, as the Ministry of Interior suspended licensing of new cars in traffic departments from 19 March to 16 April, which would cause a decline in car sales during the coming period. Many car companies incurred financial losses as a result of the inability to recover the value of the car from banks except after licensing.

The Egyptian Automotive Dealers Association submitted a memorandum to the Governor of the Central Bank of Egypt (CBE) to make an exception for car dealers from the decision, noting that hundreds of car companies will suffer greatly. It explained that cars purchased on instalment were fully paid for by dealers and they can only recover their money from banks after car licensing.

The association called for an exception to be made to enable dealers to disburse car loan even if customers do not license their cars.

A source in the Traffic Department said the decision to suspend licensing new cars will not be a major problem for consumers who want to buy new cars as car dealers can provide temporary commercial plates for up to 15 days.

He explained that those whose driving licenses have expired will only have to renew them on time through e-payment platform Fawry or Egypt Post to avoid delay charges amounting to a third of the fee. He added that this will not put pressure on e-payment outlets as the number of cars that require license renewal in the period of suspension is low. He noted that delay charges are only applicable one month after the date of the payment.

The source, however, expected that traffic departments will be overcrowded after they resume work. Even though, the administration can overcome this challenge by limiting procedures.

On a different note, the source denied that the current conditions would cause any postponement of the issuance of the new traffic law, which is currently being discussed within the parliament and is scheduled for issuance before the end of the parliamentary session.

He noted that the main challenge that traffic departments may face is determining fees of licensing electric cars, which is included in the new law, because it’s based on the engine capacity.

He pointed to the importance of automating traffic services in line with the government’s digital transformation plan, especially after the demands of the Ministry of Planning to expedite the digitisation of all government services in preparation for facing the current emergency and to avoid the disruption of public interests.

In the same context, Fawry CEO Ashraf Sabry said that the outlets will not be under pressure given their spread across the country.

He added that the financial transactions related to traffic department represent a very small percentage of the total daily transactions that take place through Fawry outlets.

He praised this step as a good gesture to create new models and different mechanisms to facilitate daily procedures and transactions, save time and effort, and prevent congestion and overcrowding that overshadows government departments, service agencies and the ability to face crises as is the situation with the rapid spread of the Coronavirus, pointing out that cooperation with traffic department continues and is automatically renewed.

He said that the company is not cooperating with any auto financing companies, because car instalments need special procedures that differ from the system through which Fawry operates, along with the high price of cars compared to any other consumer goods.

Neshat Abou Hetta, General Manager of Abu Hetta Automotive, the authorised distributor for several brands, suggested that sales of cars during the coming period will decrease 70% due to the decision to suspend licensing vehicles for a month, indicating that most of the purchasing is done through bank loans, where dealers pay the full value of cars and only get their funds back after the cars are licensed.

He explained that using commercial license plates as an alternative for licensing will not work since these plates can only be used when unlicensed cars are being moved from customs ports to stores, in addition to the low number of plates that only reaches 10 plates by store, which will not be enough for dealers to meet the demand.

He said car sales witnessed a remarkable recovery during January and February due to the limited supply of cars and its proportionality to the volume of demand, ruling out the possibility of speculating the future market condition given the circumstances around the world.

Moreover, Shady Rayan, Chairperson of El Masria Auto, said that the decision will cause the volume of sales to decrease 50 to 60% due to its effect on the car purchase instalment systems, which represent 50% of the total purchasing transactions, pointing to a satisfactory movement in car sales during the last period.

He ruled out the existence of any obstacles that may face consumers who receive their car during the coming period, stressing that the Egyptian government will allow new cars to run with their ownership papers during that period.

He also ruled out the possibility of cars running on commercial plates, as each exhibition has a low number of these plates, which will be insufficient for the size of the demand for cars.

DC Auto Chairperson Ahmed Arafa, authorised distributor for Volkswagen, Audi, Seat, Skoda, Peugeot, Opel, and other brands, agreed. He sees that the commercial plate not valid to be a substitute for the driver’s license, due to the limited number of them available at dealerships, the short time they can be used for, and the law that sets maximum passengers at two only when using them.

Arafa praised the decision to suspend the vehicle license issued by the Ministry of Interior for traffic departments that are witnessing crowdedness, which contribute to creating a greater opportunity for the spread of the epidemic, despite the damage to the auto sector.

He explained that customs outlets will be crowded as many consumers will not receive their cars after the suspension decision in addition to the preventive measures that limit movement of people, which adds to the burden for storing cars, urging the government to provide compensations through facilitations for customs release and payment of tax fees on commercial transactions on instalments.

He also pointed to the high rate of demand for cars and an increase in the volume of their sales during January and February, following the improvement in the performance of the local currency and the introduction of new models of cars, and all indications point to the recovery of the auto sector, which has changed now after the coronavirus spread.

However, he said that the disease spread could cause the auto sector that  is controlled by pressuring suppliers with sufficient stocks to lower the cost of importing cars, which would allow local dealerships to offer discounts.

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