Interest rates stir new wave across auto market

Car companies expected a new drop in sales due to the pressure from the Central Bank of Egypt's (CBE) decision to raise the benchmark interest rate for the second time in less than two months.
A member of the board of directors of the Bavarian Automotive Group and the general manager of Brilliance Egypt, Khalid Saad, said that the decision of the CBE to raise the interest rate on deposits and loans by 2% is in favour of the citizen who depends on that interest and does not have direct investments in the local market.

Nevertheless, the decision will not serve the investment inflow, especially in the auto sector, which hasn't even recovered yet from the similar interest hike decision in May only to be hit again.

He pointed out that the people wishing to invest would prefer to do so in banks rather that in risky projects.
In addition, Saad revealed that the 70% of car sales are mainly fuelled by loans, where only 30% of sales are made in cash purchases.

Moreover, he predicted that the decision to raise the interest rate will be followed by a decline in car sales more than the current rates. The customer who resorts to borrowing does not already have the necessary financial resources to qualify for direct payments, thus increasing the interest will limit the number of customers.

Meanwhile Osama Aboul Magd, president of the Association of Car Dealers, expressed his deep concern about the impact of the decision to raise interest rates on the auto sector, especially with the subsequent decline in sales following the pound flotation.