Nissan Africa chief says Egypt can become an automotive hub

2 Mins read

Egypt should end duty-free access for imported vehicles to stimulate domestic car assembly, Nissan managing director for Africa Mike Whitfield tells The Africa Report.

Nissan has to pay duty on parts that are imported for local assembly, while some completed vehicles are imported tax-free, Whitfield says from Cairo. Egyptian assembly “needs some protection” and a strategy to encourage the local production of components. The country could then become a regional export hub, he adds.

Last year, Egypt eliminated tariffs on cars imported from the European Union, even as it seeks to develop its own automotive industry. Mercedes-Benz signed a memorandum of understanding with the government in June 2019 to resume assembly operations. Production of Egypt’s first locally assembled electric car, by China’s Dongfeng Motor, is scheduled to start by the end of 2021.

READ MORE Morocco sees big investment drive from auto part manufacturers

A poor global automotive outlook is prompting carmakers to seek cheaper labour and new markets in Africa. The Economist Intelligence Unit (EIU) does not expect the global automotive industry to regain 2019 employment levels until the second half of the 2020s, at the earliest. Subject to COVID-19 developments, Whitfield is “very optimistic” on Egypt’s economic prospects for 2021.

Before COVID-19, Whitfield says, Egypt was on a strong growth trajectory. This year, he says, the government found the right balance between protecting against the pandemic and sustaining economic activity.

  • The result is that Egypt’s new car sales for 2020 are ahead of those for 2019.
  • The EIU predicts that Egypt’s GDP growth will pick up to an average of 4.7% per year from 2022.
  • The government can help to grow the size of the local market by easing consumers’ access to finance, where good progress has already been made, Whitfield says.
  • While affordability of vehicles must be a focus, Africa should not become a “dumping ground” for damaged and repaired foreign cars, he adds.

The last frontier

Nissan, which is starting vehicle assembly in Ghana, this month created a new regional business unit for Africa as it seeks expand into what Whitfield calls “the last frontier”. Sub-Saharan Africa, with 1 billion inhabitants, makes up just 1% of global new car sales. The company aims to increase localised production across African countries, he says.

The continent’s only fully fledged automotive industries are in South Africa and Morocco. Factors that have helped those countries include dialogue involving government, industry and social partners, he says. Policy certainty over at least eight to 10 years is essential, he adds.

Lynx Strategic Business Advisors in Egypt points to Morocco’s incentives to original equipment manufacturers as an example to follow.

  • These include a tax exemption in the first five years of operation, followed by an 8.75% tax for 20 years.
  • The currently small size of Egypt’s domestic market, Lynx says, has led to underutilisation of factory capacity and very slow growth of investment in automotive research and development (R&D).
  • Weak R&D investment has led to low-tech automotive components being produced in Egypt, rather than higher value-added components such as engines and gearboxes, Lynx says.
  • Lynx recommends custom duties exemptions for imported equipment used in R&D, and government scholarships for R&D researchers.
  • “Key stakeholders must work together to develop a sustainable ecosystem,” Whitfield says. “A holistic vision is needed.”

Bottom line

Strong post-COVID economic recovery prospects give Egypt the chance to establish itself as an automotive manufacturing hub.

Related posts

GoDaddy has introduced a new initiative aimed at empowering everyday entrepreneurs around the world.

2 Mins read
GoDaddy has introduced a new initiative aimed at empowering everyday entrepreneurs around the world. The company is rolling out a free online…

MTN Ghana records GH¢1.3bn profit

4 Mins read
Mobile telecommunication leader, MTN Ghana recorded a profit of GH¢1.3 billion last year, about 38.4% year-on-year growth. According to its 2020 Financial…
EntrepreneursHeadlineTechnologyWestern North Region- Sefwi WiawsoWestern Region - Sekondi

Business owners in Western Region urged to go online

1 Mins read
Takoradi, Feb. 23, GNA – Mr Isaac Charles Acquah, Vice President of the Chartered Global Investment Analysts Institute (CGIA) Network Ghana, has…

Leave a Reply

Your email address will not be published. Required fields are marked *