Automotive Assembly and Components

THE EGYPTIAN AUTOMOTIVE assembly industry dates back to the late 1950. when El-Nasr Automotive Manufactur­ing Company (NASCO). a slate-owned conglomerate, was estab­lished as a manufacturer of passenger cars, trucks, buses, agricultur­al tractors, trailers and engines in the region NASCO held a virtual monopoly on automotive production in Egypt until the economic re­forms of the late 1980s.

In 1977. Arab American Vehicles (AAV) was established as a joint-venture between the Arab Organization for Industrialization and American Motors of the I ISA. becoming the second-largest as­sembler of motor vehicles in Egypt.

With the industry's opening to private-sector participation in the 1980s, several international players came onto the scene, the first among them General Motors (GM), which began operations in Egypt in 1985 focusing mainly on the assembly of trucks and mini­buses.

In the more than two decades since, the automotive assembly sec­tor has grown from just three assembly operations that relied mainly on imported components to 26 assembly Iines (11 for passenger cars. 9 for commercial vehicles and 6 for buses) with local content exceed­ing 50% for most assembly companies. Some 440 companies are also manufacturing a wide range of automotive components for local con­sumption and export.

The two sectors together (components and assembly) employ a to­tal of59.000 workers. Global players such as Opel. BMW. Mercedes-Benz. Nissan. Citroen. Chrysler. Daewoo. Peugeot. Hyundai. Suzuki and GM are all active in the Egyptian market Domestic production currently accounts for 65% of local sales according to Business Mon­itor International.

Automotive Assembly

Egy pt is the largest automotive manufacturer and assembler in Afri­ca. According to the Egyptian Automobile Manufacturers Associa­tion (EAM A), production of commercial vehicles and passenger cars has more than doubled over the past live years. In 2003. local assem­blers produced 50.000 units as opposed to 119.000 units in 2007. Pas­senger cars account for roughly 65% of total local assembly.

Economic reforms and the associated grow ill in per capita income, as well as the variety of car loans now available on the Egyptian mar­ket, have led to significant growth in the domestic car market.

The scope for further expansion in private vehicle ownership in Egypt remains significant, with ownership currently standing at 23 vehicles per thousand people compared to 35 per thousand in Iran and over 100 per thousand people in SaudiArabia. The market is ex­pected to continue to grow reaching an estimated 4-500.000 care per year within live years.

Automotive Components (Feeder Industries)

A wide range of automotive components including upholstery, radi­ators, battery brackets, fenders, cables, headlights, jacks, air condi­tioners, tires, rubber parts, springs, brake pads, paint materials and exhaust systems are presently being manufactured in Egyptian fac­tories.

The size of the automotive components industry is estimated to be US$ 530 million; US$ 370 million goes directly to the local original equipment manufacturers (OEM) and the after sales market for 3.2 million vehicles. The sector has absorbed some US$ 130 million in investments and employs 11.700 engineers and technicians. A total of 90 companies are categorized as tier-one suppliers for Egyptian auto­motive assemblers.

Key Market Players

Hyundai and Daewoo Motors arc the two leading passenger vehicle assemblers in Egypt while General Motors is the market leader in the assembly of light commercial vehicles. Manufacturers of Com­mercial Vehicles (MCV). a company that operates under license from Mercedes-Benz, is the largest assembler of buses.

While many countries are getting out of the assembly industry. Egypt's sector has been attracting new investment from compa­nies looking to export from Egypt and to sell to the domestic market. Turkish commercial vehicle manufacturer Tesma, for example, is set to begin construction on a 11S$ 26 million plant in Egypt's Tenth of Ramadan Industrial Zone. The facility's initial annual production ca­pacity will be 500 buses and 500 minibuses supplying both local and export markets, primarily in the MKNA region. Existing assemblers continue to make significant investments in their current production lines and are opening new lines to assemble new models.

Exports

The Egyptian automotive assembly industry exports 30% of local production. In value terms. Egyptian exports of vehicles have significantly increased from IISS 111 million in 2002/03 to 11S$ 372 million in 2006/07 and I IS$ 481 mil­lion during the first half of 200708. Exports of buses accounted  for the largest share of total ve­hicles exports, roughly standing at 63% of total exports. Egypt's vehicle exports are projected to reach 14,000 units by 2012. an anticipated growth rate of 119%between 2007 and 2012.In value terms, projected export performance of this indus­try is expected to raise its importance to Egypt's foreign trade.

Meanwhile, players in Egypt's f IS$ 160 million car components sector arc showing they have what it takes to export regionally and even be integrated into the global supply chains of major parts distrib­utors and ear manufacturers.

Leoni AG of Germany is a major investor in the Egyptian automotive components sector Over the past 10 years. Leoni has been exporting all of its production and has plans to expand facilities in Egypt to replace lost capacity from other factories worldwide, where accelerating production costs are making it difficult to sustain operations.