The last period has seen great damage inflicted on global business, most notably the automotive sector, which has witnessed a significant decline in sales due to the spread of the coronavirus (COVID-19).
With the state’s decision to coexist with the virus, the question now is if the car market can rebound.
Ahmed Al-Ghorab, director of B Auto, a car trading company, said that, based on the current vision and an application of the divergence policy, there should be an increase in car sales. This comes on the back of a general reluctance to use public transport in the coming period to avoid the further spread of the disease.
He added that the coronavirus has cost the automotive market at least 40% of purchasing power, reflected by a downturn in other sectors which rely on vehicles to move around or make deliveries. These include workers in tourism, contracting, clothing, and other sectors.
This, in turn, has negatively affected the entire system, especially as most companies currently have 75% of employees on board.
There are also a range of other challenges facing the automotive sector, as it, along with other businesses, adapts the way it works in line with coexisting with the virus.
In line with state directives, companies are disinfected daily whilst workers wear masks and socially distanced. To do their part in trying to curb the spread of the coronavirus, automotive companies have also resorted to avoiding the use of cash in trading, instead focusing on bank transfers.
Al-Ghorab noted that the pandemic has forced car distributors and dealers to turn to digital marketing, making the Internet a more important channel for reaching the customer.
He stressed that the inventory is now low as car shipments from around the world were delayed in April and May, which could cause car prices to rise.
He pointed out that most automotive sector companies will work during the second half of 2020 to provide the needs of the Egyptian market. This, however, depends on the opening of ports, the stability of foreign exchange rates, market stability, and the absence of any other challenges.
Automotive industry expert Hussein Mostafa sees that sector has begun to recover, especially after many dealerships and importers launched a wave of discounts and promotions in the recent period.
He added that June will witness a great demand for cars, especially after the state’s decision to coexist with the virus and reopen the automotive sector.
He also noted that consumers will place greater importance on owning their own cars, to avoid possible infection in public transport. As a result of consumer fears, many are leaning towards buying economical, used cars.
He stressed that the car market has become more dependent on national projects that require vehicles, whether in transport or moving equipment and raw materials.
Montaser Zaytoun, Chairperson of Zaytoun Auto Mall, said the last period witnessed stagnation despite the government’s decision to coexist with the virus. The decision has not positively affected the auto sector given the uncertainty that customers still face.
He added that currently only a limited number of customers who really need cars tend to buying. A large percentage of traditional buyers were Egyptian expats, sales have been affected as many are either unable to return to the country, or have returned but are staying home.
Zaytoun pointed out that the offers launched during Ramadan by many car agents aimed to stimulate the sales movement. It is highly likely that many other companies will make offers in the coming period to offload stocks of old models. Many dealers have also reduced their profit margin or are aware that they will not sell their stock for the needed liquidity.
A decline in economics has affected car dealerships in other ways, as Zaytoun noted that some have maintained full operation capacity but lowered some wages.
The precautionary measures aimed at curbing the coronavirus have obliged car showrooms to work during the day, where they have previously remained open during the evening to catch workers who had finished their own days at work. The adjusted working hours has meant that car dealerships have reported an 80% decline in sales compared to previous years.
Osama Aboul Magd, head of the Association of Automobile Dealers in Egypt, agreed with Zaitoun that coexistence with the coronavirus will negatively affected the automotive industry in the coming period, This is on the back of consumers facing the difficulty of making a purchase decision in light of the prevailing conditions, especially since the price of the car is high.
Aboul Magd pointed out that it will be difficult to work at full production capacity in the coming period. This is particularly so given that curfew hours are forcing companies to work at half capacity, which could result in low supply.
He pointed out that all car exhibitions spaces are ensuring that the precautionary measures are in place at their facilities to preserve the health and safety of workers and clients.
Aboul Magd stressed that the offers, discounts and marketing plans that were put in place by both agents and merchants in the second half of Ramadan did not reap the desired goal. Instead, sales remained frozen during this period, as there was an almost total slump in customers during this period.
Mahmoud Hammad, head of the used cars sector at the Egyptian Automobile Dealers Association, confirmed the increase volume of demand for used cars in the current period compared to the recent past. Whilst emphasising the stability of used car prices, he noted that this is due to consumer demand for cheaper cars to avoid public transport and the spread of the virus.
He said it is likely that used car prices will increase by 10% in the coming period, due to the increase in demand and the shortage of supply. This follows the 20% fall in prices before the coronavirus crisis emerged.
Hammad pointed out that the halt in work in the used car market located in Nasr City negatively affected the movement of sales and purchases, causing sales to drop by 50%. He anticipates the reopening of the used car market at the beginning of next July, with doors to open again on Fridays and Sundays.