Business & Technology

Braking the Cycle of Overprices in the Egyptian Automotive Industry

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Braking the Cycle of Overprices in the Egyptian Automotive Industry

Photo via Daily News Egypt

“I’ve been wanting to buy a car since 2019,” says Abdelraheem Hassan, a 34-year-old Egyptian Marketing Manager.

Originally from Luxor and currently based in Giza, Hassan, like many Egyptians, repeatedly postponed his decision to purchase a car due to repeated price hikes, overpricing in the market, and aftermath of the COVID-19 pandemic. He has been depending on Uber, Careem, InDriver, and other ride-hailing apps for his daily commute, paying an average of EGP 4,000 ($255) per month.

“Despite the high prices and the overpricing, I still want to buy a car to allow me to move around freely, for more privacy, and to use it to keep different outfits or documents in case I want to go from place to place with no time to pass by home,” explains Hassan.

Exaggerated pricing, and lack of regulations governing pricing mechanisms such as extra charges and overpricing for early delivery, are some of the main issues facing car dealerships in Egypt. With annual or less than annual price increase on cars, high interest rates, and continuous hikes in fuel prices, many have completely put down the idea of purchasing a car and began seeking other, more practical or budget-friendly alternatives.

Photo via The Arab Weekly

According to a Reuters article published in March 2019, most popular models cost, on average, EGP 200,000 to EGP 350,000 ($11,500 to $20,000). Today, most popular car models cost approximately EGP 260,000 to EGP 400,000 ($16,540 to $25,445).

As part of our research, we visited two of the most popular car dealerships in Egypt and found out that a car, originally costing EGP 280,000 ($17,822), was being sold for EGP 290,000 ($18,458) in one, and EGP 307,000 ($19,540) in the other.

“Unfortunately, the car market in Egypt is corrupt,” says Remon Na’eem, a 36-year-old Egyptian tour guide and car enthusiast. Na’eem gives an example of car dealers who import certain car models, without ensuring the provision of their spare parts. While other dealers, he complains, are “specialized in the overpricing game.”

“They import a number of cars of a certain model, and instead of selling them to customers who already made bookings for that model, they distribute them among authorized dealers for a price that is slightly higher. Consequently, these dealers sell the car for a much higher price than the car’s original price,” notes Na’eem.

Based in Hurghada, Na’eem has been interested in everything car-related for years, following news and comparing prices. His friends often sought after him for advice on buying cars. As his love and knowledge about cars grew, in December 2020, self-taught Na’eem decided to create a guidance page on Facebook ‘Ghawy ‘Arabeyat Maa’ Remon Na’eem’ (Into Cars with Remon Na’eem). The page is dedicated to helping car enthusiasts seeking “free and honest advice in the car business, find what he or she is looking for.”

His page offers comparisons between vehicles, advice on suitable cars according to different budgets, car reviews, news about price hikes or the latest car models, and the car market in Egypt in general.

“In Egypt, cars are not luxury goods. For Egyptians, cars are either saved up money or a source of income such as a taxi or Uber. Most people buy cars with all the money they save up. Here in Egypt, people ask about the resale before purchasing, this is not common anywhere else in the world,” says Na’eem.

Car loans: Between high interest rates and prohibition of sales

“With 11 and 12 percent interest rate for installments, if one decides to buy a car for EGP 300,000 ($19,095), he or she ends up paying EGP 450,000 ($28,643) or EGP 500,000 ($31,825), which is almost double the car’s original price,” Na’eem continues.

In addition to the high interest rates, most banks constrain clients with a sale prohibition as one of the conditions for approving a loan request, as well as mandatory insurance.

Photo via Peters Chevrolet

“Let it Rust”

Between late 2018 and early 2019, a social media campaign entitled “Let it Rust” went viral, protesting high car prices. The campaign called to boycott buying new cars to put pressure on dealers to lower their prices. This came as consumers impatiently waited for a decrease in auto-motive prices, following the full elimination of custom tariffs on European cars during the same period.

According to Raafat Masrouga, Honorary President of the Automotive Information Council (AMIC), car sales had dropped by almost 60 percent because of the campaign.

Meanwhile, Na’eem recalls that although the campaign initially succeeded, when the goals of the campaign founders changed, the focus of the campaign slowly drifted and the goal was not achieved.

Pandemic and the automotive industry

Despite the repercussions of the COVID-19 pandemic on the global automotive industry, Egypt saw an increase in car prices since the beginning of the pandemic up until today.

“During the pandemic, the global market was suffering from a shortage of electronic chips used in cars. Companies and factories that produce these cars were on a halt, and there was a pause on global production. Here in Egypt, they used that to their advantage and put an overprice on the stocks they had,” Na’eem highlights.

“Legally, the car market in Egypt is a free market that depends on supply and demand. Cars that cost EGP 650,000 ($41,297) were being sold for EGP 800,000 ($50,827) because of the overprice phenomenon,” he continues.

Both Hassan and Na’eem agree that consumers are the power and the ones in charge, if they decide to boycott buying cars, they will pressure car dealers into reducing prices.

“If people stop buying cars, dealers will be forced to reduce their prices eventually,” says Na’eem, while insisting that no one should buy a car for more than its actual price.

Similarly, Hassan suggests launching a new campaign to regulate the pricing of cars in the Egyptian market.

“People have the power to change the scene and put an end to the greediness of car dealers,” concludes Hassan.

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A journalism graduate from the American University in Dubai who is curious, spontaneous, and often rebellious, Marina is a passionate Cairo-based journalist who aspires to become one of the most influential women in the Middle East. She likes to follow her heart and express that through words; her favorite form of expression.

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