One of the government’s biggest priorities for the past five years has been reducing imports of engineered consumer products by attracting FDI to those sectors. In September, the Ministry of Industry and Transport earmarked 28 industrial sectors for increased localization.

One of these sectors is automotive manufacturing, an industry that experienced growth in the early 2000s when high-end German brands (Mercedes-Benz and BMW); Asian carmakers from South Korea and Japan; and American brands Chevrolet (General Motors) and Jeep (Stellantis) opened factories in Egypt to meet domestic demand.

However, local, regional and global political, economic and geopolitical uncertainties have hurt the industry. From 2015 to 2024, car sales dropped from 195,000 units a year to just over 102,000, according to the Automotive Marketing Information Council (AMIC), an industry body.

To recover lost sales, the government has worked to boost auto manufacturing and its feeder industries, aiming to quadruple domestic automotive production by 2030 compared to 2024 levels.

The story, so far

According to the AMIC, the total number of vehicles sold in Egypt in 2024 rose 13% from 2023. About 80% were passenger cars, which saw an 18% increase in sales during the same period.

These figures are well below the market’s potential. In 2021 and 2022, car sales reached 184,000 and 290,000 units, according to the AMIC. These high numbers resulted from local demand bouncing back after COVID-19 lockdowns in 2020 and early 2021. Additionally, the government did not impose import restrictions to decrease local demand for foreign currency until 2023.

Regarding locally produced cars, a breakdown of 2024 data shows sales increased 24% from 2023, accounting for nearly 60% of all vehicle sales last year. Meanwhile, sales of imported vehicles grew 1%.

Currently, 14 car brands operate 19 factories in Egypt, mainly to meet local demand. Of these, two are European (BMW and Citroën), one American (Chevrolet) and the rest Asian.

Nine additional car factories are under construction, with plans to open this year or next. Only one is state-owned (Al Nasr Automotive), while the rest are Chinese passenger car brands, according to Asharq Business, Bloomberg’s Arabic service. It estimates the combined capacity of these new facilities could add 165,000 units by 2026.

Hussein Mostafa, AMIC CEO, told Asharq Business that Egypt needs at least 250,000 new cars to meet rising local demand. By the end of next year, domestic production should reach 260,000 units annually if the new factories come online as scheduled.

Auto strategies

Currently, the government incentivizes local markets according to the 2022 National Automotive Strategy (NAS) and the 2023 Automotive Industry Development Protocol (AIDP), which include vehicle producers and feeder industries.

The NAS provides all local car manufacturers with lower tariffs than the national level, simpler customs procedures, the right to register land as a private free economic zone, and reduced real estate taxes and VAT, in addition to incentives outlined in the National Investment Law.

The AIDP offers extra benefits. According to the Ministry of Finance, these include greater incentives; priority in releasing imported semifinished goods, raw materials and manufacturing equipment; access to automated customs and tax systems; and a dedicated ministry office to handle their issues.

Additionally, the government promises to reimburse the full cost of factory land if an AIDP-registered automaker produces more than 100,000 fossil-fuel-powered cars or 10,000 electric vehicles (EVs). These automakers also qualify for export incentives based on the number of cars they sell abroad. The incentives increase if the manufacturer exceeds the government’s benchmarks for that year.

To be eligible for the AIDP, automakers must undergo annual and biannual reviews to meet increasingly strict production requirements. In 2025, eligible companies must produce at least 10,000 fossil-fuel vehicles annually, with a minimum of 5,000 units per model. EV producers will need to start with at least 1,000 cars yearly and work up to 7,000 units.

Other eligibility requirements include a retail price ceiling for locally made cars of EGP 1.25 million ($26,344) and engines no larger than 1,600 cubic centimeters. The maximum incentive is 30% of the car’s price. Additionally, natural gas-powered vehicle producers must obtain additional certification from the Ministry of Petroleum.

Government support

For all local carmakers, the Ministry of Industry and Trade opened a dedicated office in 2022. It’s responsible for creating policies and frameworks, helping struggling local producers restructure and reopen, and processing applications for existing and future national auto support programs.

The Supreme Council for Auto Manufacturing, established in 2022, develops the main legislative and administrative reform frameworks for vehicle producers.

The government also provides financing through a fund for manufacturers of “environmentally friendly” vehicles, including EVs and their R&D centers, as well as natural gas vehicles, which, according to the International Monetary Fund, is the least polluting fossil fuel.

Additionally, the 2021 Presidential Initiative for Vehicle Modernization encourages owners of passenger cars more than 20 years old to switch to new, locally assembled vehicles.

Supporting industries

For feeder industries, the government has attracted manufacturers like Italy-based Prometeon (Pirelli brand) to produce truck tires locally, along with companies making electrical looms, filters and other engine components, according to an infographic from the Cabinet’s website.

Plans are underway to build factories in 2026 to produce EV batteries, charging stations and other electronic components, as noted by the Cabinet website.

Lastly, in December, the government launched the Android Automotive program for training developers in car software and interfaces.

Long-term plan

The government aims to increase auto production to 400,000 units annually by 2030. This target requires manufacturing at least 135,000 cars each year, more than the 165,000 units to be produced in the factories opening in 2025 and 2026.

By 2030, the NAS will require all automakers to use at least 60% local components, up from the current 45%.

A news report this year from Asharq Business highlighted several challenges facing local producers and potential new entrants to the market. Khaled Saad, secretary-general of the Auto Manufacturers’ Association, told Asharq Business the issues mainly involve geopolitical stress, digital infrastructure, and ongoing bureaucracy, despite the government’s best efforts.

Saad also noted some manufacturers barely exceed current localization requirements, stressing that a significant increase in feeder variety and capacity is crucial for achieving the 60% target by 2030, adding that many government discussions are not translating quickly enough into tangible investments on the ground. Additionally, there is a need for technical training for local auto workers.

A memo from the Auto Feeders Association and several local carmakers highlighted the need for fairness. For example, while imported EVs and European car brands are exempt from customs, the law requires local manufacturers to pay fees and customs when importing the parts and equipment. The memo recommends full customs and fee exemptions for local automakers when purchasing semifinished parts, raw materials or equipment.

In July, Asharq Business reported local experts believe the success of the government’s auto localization plan depends on its commitment to investing in existing technologies, ensuring that incentives remain effective as prices increase, and “guaranteeing the stability of industrial policies in general,” stressing that regional competition is increasingly “aggressive and fast-moving.”