A hard currency shortage and the devaluation of the Egyptian pound have made it harder for the average citizen to afford to buy new cars. On the other hand, there has been a surge in electric vehicle (EV) imports as Egyptians see them as more cost-effective. Eyeing an opportunity, the government has accelerated its push to produce affordable EVs, which also helps bring Egypt closer to its sustainability goals.
Due to its massive population, Egyptian roads are overly congested, making it one of the world's largest contributors to air pollution and greenhouse gas emissions, which worsens climate change. And given the fact that the transportation sector accounts for 28% of Egypt's energy consumption, the need to explore alternative energy options has only heightened.
Boosting local production of EVs is seen as an important step in this direction and helps Egypt in its vision for 2030, which sees itself as a regional EV hub. The good news is that Egypt already has 45% of the components needed to produce EVs, raising its potential to become one of the largest producers and exporters of electric vehicles.
To this end, the government has laid out a string of incentives to encourage private-sector collaboration, including exemption from customs duties on imported components and raw materials needed to produce EVs. One project involving the Ministry of Planning and Economic Development, the Ministry of Military Production and a company called MCV is set to produce Egypt's first electric bus.
Additionally, the government facilitated an agreement to set up an EV factory with the Chinese company BAIC and a subsidiary of the Egyptian International Motors Group, Alkan Auto. The factory is expected to start production by the end of 2025 and will cater to local and MENA markets. It is expected to produce 20,000 cars in the first year and continue to increase production to reach 50,000 annually by the fifth year. Currently, 48% of the project is locally owned, but the goal will be to get that percentage up to 58%.
In May, Egypt signed an agreement with FAW, China's second-largest electric vehicle manufacturer, to produce affordable electric cars. Local production is expected to begin in the first quarter of next year. The agreement aims to increase the percentage of local components in these vehicles to 65% and to market them at home and abroad.
Advantages and benefits
Localising automotive manufacturing reduces dependence on imports and saves foreign exchange, supporting monetary policy and stabilising the pound. Additionally, Egypt's strategic geographical location and robust and youthful workforce make it an ideal EV hub.
The Industrial Modernisation Centre, which is affiliated with the Ministry of Trade and Industry, has launched the National Programme for Encouraging Local Manufacturing to support promising industries. And students are also being incentivised to pursue degrees in technology and engineering to revitalise Egypt's industrial sector. Egypt already has a vast pool of electrical engineers to draw upon. Boosting the EV industry will help provide much-needed employment opportunities in the country.
Egypt can also draw on its prior automotive experience. The first automobile manufacturer was El Nasr Automotive Manufacturing Company, which was launched in 1961. Afterwards, more companies mushroomed, but a string of setbacks saw the industry scale back to focus more on assembly rather than manufacturing.
By 2010, car production had reached approximately 116,000 vehicles annually. Following the Arab Spring, which saw the toppling of Hosni Mubarak's government in 2011, the industry took a hit, witnessing a 30% decline in production. And the weakness of the Egyptian pound and a shortage of foreign currency meant output continued to fall.
Egypt already has 19 automotive manufacturing plants, in addition to free economic zones in the Suez Canal area, which can provide essential facilities to support the EV industry.
