Finding a vaccine for COVID-19, if not for a miracle, will not be possible in the near future; however, keeping the economic lockdown would lead to a disaster.
The bottom line is life has to return to normal and people have no choice but to resume working while taking precautions. We have no choice but to modify work environments, change our business models, and maintain social distancing. Whether we like it or not, we have to coexist with the new reality.
Karim El Naggar, Chairperson of Kayan and CEO of Egyptian Automotive Trading, said that adapting and co-existing with the coronavirus is extremely difficult but necessary to keep the economy moving.
He added that major car companies have already changed their marketing policies away from traditional methods, such as exhibitions and large gatherings, which were the pre-pandemic norm. Instead, they will now have to shift to electronic marketing and social media campaigns as implementing marketing and direct interaction with customers is difficult due to the current crisis.
El Naggar pointed out that he shift to digital marketing will also have to keep pace with modern technological developments, as traditional methods have lost their marketing value. This has come on the back of increasing consumer responses to electronic marketing.
He noted that his company has not limited its promotional policy to lowering car prices, but is also following a variety of marketing plans to reach out to customers. These include extending the warranty period for all Volkswagen brands, for which the Egyptian Automotive Trading Company is the country agent. There are also several instalment programmes for the Audi A6 that includes three years without interest and free three-year maintenance, alongside a three-year extended warranty.
El Naggar urged car dealers to switch to e-marketing methods through social networks, as this has now become the only method for marketing their cars, after the night time curfew was imposed. This is especially as automotive industry commercial activities have until now been heavily dependent on highest footfall during evening opening hours.
He also pointed out that future customers will buy cars without seeing them first, a commercial model first tried and tested by electric car maker, Tesla. In a method replicated by German manufacturer Volkswagen, the US automotive firm launched its new model online, seeing its units sold out before the car was even made.
El Naggar noted that automotive companies are suffering from deterioration in economic conditions, particularly following moves by banks to increase interest rates on companies deferring loan premium payment. The deferment has come on the back of the Central Bank of Egypt (CBE) decision to delay loan instalment payments for a period of six months due to the pandemic.
He added that companies are looking to cooperate and negotiate with real estate finance companies and banks to extend the payment period with no additional interest. With this on board, companies will be able continue operating in the local market, especially after their commitment to the government’s request not to prejudice employees.
El Naggar explained that his company has paid the salaries of over 1,200 employees in the past two months, despite low financial resources and revenues. Many automotive companies have suffered economic stress on the back of the current sales stagnation, with some companies and brands facing a market exit in the coming period.
Alaa Elsaba, a member of the Cairo Chamber of Commerce’s auto division and head of the Elsaba Automotive dealership, said the auto sector is, like other sectors, suffering due to the ongoing pandemic.
Elsaba believes that the car showrooms have been more significantly affected under the partial lockdown conditions and restrictions on their working hours.
Like El Naggar, Elsaba noted that car showrooms depend on evening opening hours when higher footfall occurs as customers have finished their own working days, and when they are more likely to purchase a car.
He noted that the current conditions have forced companies to change their marketing plans and, instead, turn to electronic channels to reach customers. With the evening curfew in effect and commercial shops required to close earlier than normal in the day, the trend for digital media campaigns has become the priority means for companies to reach customers with promotional offers.
Elsaba Automotive has offered a special package at its service and maintenance centres for healthcare workers, with further offers to be made available dependent on market conditions.
Elsaba said that dealers have offered a variety of price discounts during Ramadan, to stimulate sales despite the limited supply. The decline in supply has come on the back of a sharp decline in demand for cars due to the differing priorities of consumers and the multiple ambiguities surrounding the pandemic.
This has prompted a decline in consumer spending in the automotive sector which has in turn put automotive dealers close to the line. With salary cuts a reality for some consumers, they tend to save money and refrain from buying new vehicles even through loans to avoid committing to monthly payments.
Elsaba noted that the coronavirus created a new market phenomenon, a lack of supply and demand at the same time. In addition to reduced consumer confidence, automotive sector production briefly came to a halt over March and April, which in turn reduce car production volumes.
He noted that automotive companies have resorted to lowering car prices to stimulate purchases and secure liquidity for companies, rather than decreasing maintenance services and warranty costs which take a long time before the customer benefit from them.
Elsaba pointed out that agents are no longer resorting to instalments as a marketing and promotion method, particularly as some companies own financial arms. Yet others are cooperating with banks to provide the best offer on instalments.
He noted that it is unlikely automotive companies will go out of business due to the ongoing local and global economic hardships, as all companies are currently facing the same problem.
Elsaba said that auto production facilities returning to work at a quarter or half of their production capacity will affect agents with a certain shipment volume due to the limited production volume.
He noted that banking sector assistance will contribute to financial solvency, in addition to reducing expenditure and operating costs. With these measures on board, an economic balance between expenses and revenues will come into effect, by dispensing with some service centres.
He stressed that automotive sector’s human resources should not be prejudiced, as the workforce represents part of the company’s investments. They have also been trained to improve the quality of services, with cuts in this sector representing a significant and negative loss to the company.
Montaser Zaitoun, member of the Automobile Division of the Federation of Chambers of Commerce (FEDCOC) and Chairperson of Zaitoun Auto Mall, said that companies now have to face low consumer demand and deferred purchase decisions. These potential hampering effects on the sector come despite government plans to co-exist with the virus and gradually open the country up to business again.
Zaitoun added that the virus has forced distributors and merchants to shift to online marketing techniques and digital finance methods. Despite the latter starting to play a more significant role in business practices as part of CBE directives, Egypt’s online sales culture remains small-scale, and has kept sales low.
He explained that discount offers launched during Ramadan have boosted sales, particularly as Traffic Department units resumed work issuing licences. Additionally, companies always launch discount offers, particularly in March and April, before introducing newer models to get rid of older models.
Zaitoun noted that the repercussions due to the pandemic have deferred the launch of these offers, with promotional offers likely to continue until the old stock has been depleted.
Despite a potential return to normal following the Eid Al-Fitr holiday, he added that automotive sales have decreased by 80% due to government precautionary measures which have limited car showroom working hours.
Zaitoun denied that companies would withdraw from the local market due to the current negative market conditions, as steps have been taken to support the sector through the shaky economics.
A strategy specific to the auto industry is currently being studied, in the hopes that it will provide concessions and grants to manufacturers and importers, with companies likely to define their own strategies.