Egypt is of the most populated country in the Arab world which is growing faster than other MENA countries leading to an increase in the target audience of the automobile industry. As per Ken Research findings, there are around 11 Mn licensed vehicles in Egypt, almost half of which are private cars and these numbers are poised to grow rapidly as speedy migration to urban areas is causing heavy demand for personal cars in the country.
But here is the catch- Egyptians are more likely to be inclined towards second-hand or used cars when it comes to buying personal vehicles. In this segment, we have talked about those factors that have brought significant shifts in consumer demand and given an edge to the Used Car industry in Egypt.
1. Growing Population and Rapid Migration to Urban Areas causing an Increase in Demand for Personal Vehicles in Egypt
Total Population by Age (Mn), 20211
Total Population by Governorate (Mn), 20212
| Governorate |
Population in Mn |
| Cairo |
10.0 |
| Giza |
9.2 |
| Sharkia |
7.6 |
| Dakahlia |
6.8 |
| Others* |
67.8 |
Source: 2. Campas Egypt Statistics
Impact of Demographic Change in Egypt
Rapid Growing Population
- Egypt ,being the most populated country in the Arab world (101.4 Mn)2, is growing faster than other MENA countries leading to an increase in the target audience of automobile industry.
- The country is currently ranked 14th most rapidly growing population in the world and is expected to increase by ~50% by 2050.3
Shift to Urban Area
- Urbanization is expected to rise to more than 60% by 2030, which means increased demand for urban jobs, housing, infrastructure, and social services such as public transportation.4
- Moreover, the recent increase in the cost of public transportation, personal vehicles demands is on the rise.
Workforce and Minimum Wage
- The size of the work force in Egypt was 43.0%.5 Many standard labor practices apply, including mandatory severance packages, and overtime payments.
- The minimum wage in Egypt is currently $152.4.6 While not the lowest labor market in the region, Egypt’s workforce is among the most cost-efficient in the world and suitable for automobile industry.
1. Statista | 2. Campas Egypt Statistics | 3. ERF | 4. Daily News Egypt | 5. The Global Economy | 6. Egypt Independent
Source: Note: *comprises Alexandra, Luxor, Suez, etc. | Source: Industry Articles, Interview with Industry Experts, Ken Research Analysis
2. 3 in 4 Consumers in Egypt prefer to buy Used Car due to several factors, including the cost of license, the decline in car’s value once they are licensed, and low price of spare parts, etc.
Ratio of Used to New Car Ratio, 2016-2021P
Average Price of Used Cars in $ (‘000), 2016-2021P
Key Drivers
- Consumers buy a new car every three to four years, while others prefer to buy used cars to avoid paying licensing costs for new models.2
- On an average Egyptians use ~3 use cars on a purchase of 1 new car as new cars are currently facing a shortage in supply, due to the agents changing their import policy on the back of the economic fallout of the COVID-19 pandemic.
- Used to new car sale is rising as used vehicle models have lots of the latest technologies that large families can easily accommodate and enjoy good features & new technology at relatively low rates compared to the new vehicles.
1. Business Today Egypt | 2. Daily News Egypt | P refers to Projected
Source: Industry Articles, Interview with Industry Experts, Ken Research Analysis
3. Social media plays a major role in generating leads for dealers & end consumers by virtue of offering advertisements at a lower cost with respect to other traditional marketing channels
Online Buying Preferences
Source: Industry Articles, Interview with Industry Experts, Ken Research Analysis
4. Online Auto portals are also stepping in and offering a plethora of services to solve the pain points faced by customers to drive more sales to the market
Pain Points
- Tedious process of looking for interested buyers & communicating with them as sellers may not always have the time & may look for convenience
- Market dominated by unorganized sector and unverified sellers leading to susceptibility to scams and trust issues.
- While purchasing from small unorganized dealers, buyers do not get any additional service offerings such as inspection report, warranty, insurance etc
- Buyers have to go through Tedious Re-Registration & Transfer Process, when they opt to re-registering the vehicle
- Before purchasing, buyer schedule to visit the seller to inspect the car which is a time taking process that depends on mutual decision of both seller and buyer.
Solutions
- Many auto portals are now enabling sellers to sell their cars directly to dealers through online bidding, reducing lead time for sellers
- Auto portals often highlight trusted sellers on their platform, which leads to higher customer confidence
- Online marketplaces often offer additional services such as detailed car inspection & vehicle history report, after-sales & value-added services including warranty, insurance, ownership transfer assistance etc.
- Online Marketplace will help the buyer by supporting with the RTO procedure for Online registration
- Auto portals are now setting up inspection centres in major cities where customers can come & immediately sell their car post inspection
Source: Industry Articles, Interview with Industry Experts, Ken Research Analysis
5. Also, flexible contractual Terms in financing used cars are further accelerating the growth of the used car industry in Egypt.
Recent Developments in Car Financing Industry
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monitoring
The Ministry of Finance, Egypt issued a decree that gives used cars, which run with electric engines or are powered by electric and fossil engines, a 10 percent deduction on the free of board (FOB) value applied to imported used cars.1
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The Central Bank of Egypt (CBE) has recently decided to raise the maximum installments allowed from a customer’s total fixed income to 50.0% instead of 40.0%
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Ghabbour Auto (GB Auto) obtained the final approval from Egypt’s Financial Regulatory Authority (FRA) to add consumer finance activities to its factoring subsidiary Drive.2
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Non-bank financial companies are still underdeveloped in the country, hence the major source of private finance in Egypt is dealership financing or public financing through Banks
Common Contractual Terms in Used Car Financing
Features & Benefits:
- Finance up to 100% of the car value
- 0% admin fees and cashback
- Free Insurance policy for life
- Flexible lending conditions
- Car Sale restriction and insurance is required except for payroll customers
- Flexible down payment options
- No guarantor required
Documents Required:
- Completed application form
- Copy of National ID
- Recent utility bill e.g. electricity, Recent telephone, electricity or gas utility bill (maximum 3 months old)
- Salary transfer declaration
- Car Price quotation
1. Ahram Online | 2. Zawya
Source: Industry Articles, Interview with Industry Experts, Ken Research Analysis
