Chinese automaker to produce electric cars in Egypt

Egypt’s oldest automotive manufacturing company has signed a deal with China’s Dongfeng Motor to produce electric cars for the first time in the country.

al-monitor An employee works on the assembly line at the Dongfeng Fengshen plant on March 24, 2020 in Wuhan, Hubei province, China. Photo by Getty Images.

Topics covered

chinese competition, china, egyptian economy, automotive sector, automobile industry, electric cars

Jul 7, 2020

In what could be a win-win situation for both countries, Egypt’s state-owned El Nasr Automotive Manufacturing Company and China’s Dongfeng Motor signed an agreement on June 18 to produce electric cars for the first time in Egypt.

According to the agreement with the Chinese automaker, El Nasr will produce 25,000 electric vehicles annually. Egyptian Minister of Public Enterprise Sector Hisham Tawfik said the agreement will mark a comeback for El Nasr, which has been shuttered since 2009.

As part of a dream to turn Egypt into an industrial hub, late President Gamal Abdel Nasser founded El Nasr Automotive Manufacturing Company in 1959. The company began production in 1960 at the rate of eight cars a day. El Nasr operated until 2009, assembling Fiat cars, until the government decreed that its assets be liquidated.

“Both sides will benefit,” said Benjamin Cavender, director at the Shanghai-based China Market Research Group. “Selling Chinese electric vehicles to governments in Africa and Southeast Asia makes a lot of sense as countries in these regions are looking for manufacturing jobs and investment money,” Cavender told Al-Monitor, noting that financially strained Chinese automakers would be inclined to do the same.

According to him, Chinese automakers will find great opportunity in Africa, where countries are seeking investment to revive economic growth on the back of the COVID-19 pandemic. 

“That’s why [African and South Asian countries] are more amenable to opening the doors to Chinese companies. They are also key markets, as Chinese firms can often be highly cost competitive compared to Western automakers, so both sides benefit,” Cavender said.

He stressed that Chinese automakers will benefit from the Egyptian market in a step toward global expansion. 

“Africa and more specifically Egypt are critical to the ambitions of China's electric vehicle industry. Chinese automobile manufacturers have for a long time been looking at how they can win foreign markets but have struggled to break into Western Europe and North America,” he said.

As for the repercussions of the pandemic, Cavender believes financial strain has urged Chinese automakers to focus on a long-term strategy based on market penetration for sustained business growth.

“COVID-19 has likely slowed down negotiations and also put Chinese firms under more financial strain as they have seen sales dry up through the first quarter of 2020. However, they typically are thinking long-term, so whether or not they have to slow investment now it's highly likely that we continue to see interest in building out electric vehicle manufacturing in Egypt going forward,” he explained.

The coronavirus pandemic has negatively impacted China’s first quarter vehicle sales, the World Economic Forum reported in its Global Agenda. According to the China Association of Automobile Manufacturers, sales of passenger cars declined by 42.4% year-on-year. SAIC, one of China’s largest automakers, reported a 44.9% decline in April.

However, there will be much work to do to create local demand for electric vehicles in Egypt, Essam Nabil, a director of an automotive maintenance center in Cairo, told Al-Monitor. “It’s a good move for reviving a company like El Nasr. However, there should be infrastructure to persuade Egyptians to buy an electric vehicle. For instance, will there be charging stations?”

Tawfik told Mubasher Jan. 28 that boosting the electric vehicle market in Egypt will take a three-pillar strategy, including charging stations and financial assistance for new buyers. He said the Ministry of Electricity will build 3,000 charging stations across the country over three years, noting that success stories in other countries, especially China, will provide the guidelines for promoting the plug-in vehicles.

In 2018, Revolta Egypt, a developer of electric charging infrastructure and other electric vehicle-related projects, opened Egypt's first vehicle charging station of a planned 65 units across seven Egyptian governorates.

“Electric vehicles will dominate in the future. They are perfect for the environment and cheaper, too. The local media should also increase public awareness about electric vehicles as a new global trend for a clean ecological system,” Nabil said.

There is no official data available on the number of electric vehicles in Egypt, but they have been on the rise worldwide. According to EV Volumes.com, the electric vehicle world sales database, global deliveries of plug-in vehicles rose by 9% in 2019 compared with 2018. Sales of electric vehicles surged 44% in Europe in 2019.

“Most importantly, there should be well-trained technicians capable of handling electric vehicles. Skillful technicians and enough charging units will encourage the local customers to buy these plug-in cars. I think El Nasr will have a chance to produce cheap vehicles, as it used to do more than 20 years ago,” Nabil added.

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