Egypt's automotive market experiences unprecedented wave of price hikes due to a dollar crisis amid anticipation by analysts that the Egyptian pound would be further devaluated by the Central Bank. (Xinhua/AFP Photo)
CAIRO, July 29 (Xinhua) -- The automotive market in Egypt has been experiencing an unprecedented wave of price hikes due to a dollar crisis amid anticipation by analysts that the Egyptian pound would be further devaluated by the Central Bank.
Fluctuations in the exchange rate have cast shadow on the import sector, threatening a potential stagnation in the car market, as an acute hard currency shortage hampers trade in the import-dependent country.
"We closed our store over the past five days," said Kareem Hussein, sales manager at Stars Auto store in downtown Cairo.
"The increase of the dollar's exchange rate against the local currency caused stagnation in the sales and made the clients reluctant to conclude any deal," he added.
The store imported cars in foreign currency, and the client signs an initial contract with a certain price in Egyptian pound which changes at the delivery time, he explained.
"I have to change the prices to cope up with the devaluation of pound," he added.
The automotive market has witnessed significant leaps in prices over the past few months, driven by the shortage of hard currency and the high exchange rate in the parallel market.
"The prices of nearly 153 car models from different brands continued skyrocketing towards record highs in July compared to 135 models earlier in June," Hussein added.
Those brands include the German carmakers Opel and BMW, Korea's Hyundai and Kia, the American Chevrolet, the French Renault and Peugeot, and the Japanese Nissan and Mazda.
"Mitsubishi raised the prices of the first class Lancer EX 9,000 pounds (1,000 U.S. dollars) to reach 185,000 pounds (21,000 dollars) from 165,000 pounds (19,000 dollars) two month ago, while Hyundai Tucson price has reached 330,000 (37.174 dollars) from 295,000 pounds (33.231 dollars), and Chevrolet Aveo ceiled 136,000 pounds (15,000 dollars) from 110,000 pounds (12.391 dollars)," Hussein pointed out.
He added that the prices of the Chinese brand model of Geely Emgrand also have climbed, from 85,000 pounds (9.575 dollars) to 122,000 pounds (14.000 dollars).
The Egyptian pound weakened to a shocking rate of 13 against the U.S. dollar on the black market on Tuesday, at least 42 percent weaker than the Central Bank's official rate of 8.78.
On Friday, the pound was trading at around 11 per dollar on the black market after a security crackdown had been launched on many exchange offices on Wednesday and Thursday.
The official banking system has been suffering from lack of "dollar resources" since the 2011 popular uprising, which led to the reluctance of foreign tourists and investments, the two main sources of hard currency.
Egypt's car imports increased by 35 percent in the first 10 months of the fiscal year 2015/2016 compared to the previous year, according to the Egyptian Customs Authority.
However, the auto sales have declined by nearly 50 percent in July due to the unprecedented price hikes, Hussein said.
Some 10 percent of the clients have withdrawn their deposits last week, he pointed out.
"We live in a nightmare due to the dollar crisis," he lamented.
Meanwhile, Emad Zagloul, accountant in his 30s, was more relaxed as he purchased his Mitsubishi Shark 2016 in March with 160,000 (18,000 dollars), though it hits now a record price of 200,000 pounds (23,000 dollars.)
"Thank God I made my decision earlier. Otherwise, it is impossible to buy it now."
The government should take harsh procedures to combat the black market and reduce customs tariffs of cars, said Ahmad Khamis, owner of Speed Auto Store in Giza outskirt of Haram.
"The clients cancel the reservation and I couldn't force them to buy with the new increased prices," he added.
If the dollar crisis continues, the auto market will be in stagnation for a long time, which will be a real catastrophe, he noted.
Nour al-Din Darwish, head of the Cars Branch at Cairo Commerce Chamber, agrees that the automotive market suffers severe stumbles in light of the high prices, as well as the shortage of the dollars and the banks' reluctance to fund the importers with green currency to fulfill their financial obligations.
He reiterated the devaluation of pound has caused tremendous losses in the car sector and forced the merchants to increase the prices by 32 percent and made them looked like "exploiters."
