Egypt's car assembly ambitions await investment

Despite ambitious plans and government support, the sector still lacks the necessary infrastructure and capital to become an export hub that supplies high-quality vehicles abroad

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A truck assembly line at a General Motors plant in Egypt.

Egypt's car assembly ambitions await investment

Marcelle Nasr

last update on 24 Sep 2025

In recent years, Egypt has witnessed a notable transformation in its automotive industry, particularly in the local assembly of vehicles. The government aims to develop this sector into an economic engine that drives employment and brings prosperity through exports, while reducing dependence on imports whose costs have soared.

Yet there are a host of challenges, not least an absence of foreign direct investment (FDI), questions over production quality, and limited domestic demand. Furthermore, the move towards localising car manufacturing comes in the wake of currency crises and declining purchasing power. Three years ago, a dollar cost EGP 15. Today, it costs nearer to EGP 50 (itself much improved from a recent high of EGP 70). This means that car prices have tripled, with sales of imported cars having shrunk significantly.

At the same time, Egypt is attracting global brands. In particular, Chinese firms see the Egyptian market as a springboard into Africa and the Middle East. Several Chinese marques are preparing to begin local production in the coming months, among them MG, Jetour, GAC, Changan, Haval, and BAIC. Geely began production in January. Their arrival has been accompanied by tax incentives and support.

Part of the plan

Egypt’s National Automotive Industry Strategy (NAIS) aims to boost local production, improve the legislative environment, provide financing, and encourage exports, with a focus on electric vehicles (EVs), but these grand ambitions face harsh realities, given that the industry still lacks the fundamentals necessary to become an export hub.

Mohamed Sheta, an auto industry expert, says most factories operating in Egypt have an annual production capacity of 5,000 cars, the exceptions being Nissan, GB, and Chevrolet, which produce around 10,000 vehicles annually.

Most production is directed to the domestic market with very little slated for export. “Weak quality and the absence of international standards are barriers to exports, leaving the local industry in relative isolation,” says Sheta. “The state doesn’t reap the full benefits of the sector, either in terms of job creation or foreign currency revenues”.

Market estimates suggest that the total production of locally assembled cars in Egypt in 2025 will not exceed 60,000 units—a modest figure compared with other African countries such as South Africa (650,000 vehicles) and Morocco (530,000 vehicles, more than 60% of which are exported).

Experiences elsewhere suggest that the revival of an automotive sector relies not merely on local assembly but on strategic partnerships with global manufacturers and large-scale FDI, which enables technology transfer, upgrades production lines, and achieves the quality standards required for export.

The Moroccan government won FDI from major auto manufacturers such as Renault and Peugeot, who invested $1-2bn per plant, establishing the country as a major export hub, while in Saudi Arabia, Hyundai recently started building its first plant.

However, foreign companies remain reluctant to invest in Egypt. According to Sheta, the reasons include "the small market, the absence of advanced industrial infrastructure, and import restrictions imposed since 1998 that ban the entry of used cars".

The revival of the automotive sector relies not merely on local assembly but on strategic partnerships with global manufacturers and large-scale FDI

Overcoming obstacles

The debate over the feasibility of local car assembly in Egypt continues. Montasser Zeitoun, of the Automobile Dealers Association, says the industry "supports the national economy by generating jobs and stimulating feeder industries". The supply chain he refers to comprises up to 200 factories. He adds that "local assembly reduces prices significantly compared with imports". Customs duties on imported cars with a 1600cc engine reach 65%, whereas duties on production components for local assembly do not exceed 7%, meaning locally assembled vehicles have a price advantage.

Yet Sheta contends that "without high-quality exports, local assembly is nothing more than a domestic commercial activity". He argues that locally assembled cars still come with high costs owing to weak quality and production costs. "This strips them of competitiveness and limits their spread, especially in the absence of genuine alternatives in the form of used cars, whose import is banned by the state."

In its NAIS, the Egyptian government recognises the importance of shifting from assembly to full-scale manufacturing by creating an integrated industrial infrastructure encompassing feeder industries, local suppliers, research centres, and technical training. This is expected to gradually raise local content to 60% or more, opening the door for Egyptian-made cars to compete in regional markets.

In this context, Prime Minister Mostafa Madbouly launched the Automotive Industry Incentive Programme, which provides financial and tax incentives for companies that commit to increasing local content, developing technology, and upgrading production lines. President Abdel Fattah el-Sisi has allocated around $2bn to support the automotive sector, which he views as a vital industry.

Yet some analysts ask whether this support is enough to deliver a breakthrough without a comprehensive plan to attract FDI, remove bureaucratic obstacles, liberalise the market, develop technical education, and ensure supportive industrial infrastructure, including ports, roads, and service centres.

AFP — A used car market in the eastern suburbs of Cairo.

According to unofficial estimates, the cost of building a car factory with an annual production capacity of 200,000 vehicles is $1-2bn, meaning that—at best—the government's $2bn would build no more than two factories, once again highlighting the urgent need for private-sector partners.

Such potential partners will take note of the statistics. For instance, in a country of 108 million people, there are fewer than 10 million cars on the roads, indicating low domestic consumption compared with other countries with smaller populations. They will also note an absence of major brands. No Egyptian auto factories are directly owned by companies such as Toyota, Volkswagen, or Ford, limiting technology transfer and the development of production lines. Although there are more than 200 feeder-industry factories, their ability to meet quality and quantity requirements remains limited, forcing manufacturers to rely on imports.

Opportunities for risk-takers

Yet there are opportunities for those willing to take the risk. Egypt's strategic geographic location would enable car exports to Africa, the Middle East, and Europe, and multiple trade agreements (such as COMESA) allow access to African markets without customs duties. The global shift towards EVs gives Egypt an opportunity to carve out a niche if it invests early, and there is an obvious political willingness to transform Egypt into a regional automotive hub, with incentives and strategies in place.

Without FDI from major manufacturers capable of transferring technology, injecting capital, and training staff, however, Egypt's automotive industry will remain confined to limited assembly operations, unable to realise the state's export ambitions or achieve a qualitative leap in quality and production. To follow Morocco or South Africa, it must welcome international partnerships and adopt a modern production model based on quality, competitiveness, and sustainability. It won't be easy, but it's not impossible.

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