20070605_BF_112909 - 24 May 2007 GB Auto (Ghabbour)...

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24 May 2007 Initial Coverage Research Menatalla Sadek, CFA [email protected] Tarek Shahin [email protected] Isis Bldg., Osiris St., 9 th floor Garden City, Cairo, Egypt 11451 Tel: +20 (0)2 792 6610 Fax: +20 (0)2 792 6620 GB Auto (“Ghabbour”) Automotive Industry | Egypt “Drive” A leading player in the automotive market in Egypt GB Auto S.A.E. (“Ghabbour”) is a leading player in Egypt’s automotive industry, with over E£3.1 billion (US$546.3 million) in revenues in 2006. The company is an assembler and distributor of passenger cars and commercial vehicles and operates Egypt’s biggest network of service centres. Currently, its flagship asset is its exclusive license from South Korea’s Hyundai Motor Company to assemble and distribute Hyundai cars, Egypt’s best selling passenger cars, which had around 27% of the market in 2006. Ghabbour is also a manufacturer of commercial vehicles, namely buses and trucks under exclusive licenses from Japanese automakers, Mitsubishi, the Swedish group, Volvo, and also Hyundai. Among the group’s other lines of business are: distribution of motorcycles and scooters, through an exclusive partnership with India’s Bajaj; the distribution of tires through licenses from Turkey’s Lassa and China’s Double Coin; and the distribution and service of construction equipment through an exclusive license from Volvo as well as materials handling equipments from German producers, Linde. Passenger car sales contributed 72% to total revenue in 2006, while commercial vehicles contributed 13%. The remaining 15% came from other operations, mainly motorcycles and scooters. As we argue in this report, the strength of passenger cars growth aside, there is great potential for the group’s other lines of business and we believe Ghabbour’s revenue mix will change in the next few years to greater diversification. Moreover, the group will seek to increasingly benefit from a rising service revenue that should mirror the rise in vehicle sales, as it spreads its network of service centres to enhance its 3S strategy (sales, service and spare parts). Market poised for continuing growth The Egyptian automotive market is the largest market in North Africa and currently serves the largest population in the region, with huge domestic market potential, given the currently small size of the market in terms of vehicle penetration. The industry in Egypt has witnessed a significant revival since 2004, following the reform measures that came with Egypt’s economic liberalization, the most important of which was the reduction in tariffs on imported vehicles, the significant reduction in personal income taxes and a halving in corporate income taxes to 20%. Total automotive sales grew by 41% in 2006 to reach 170,612 units, including cars, buses, and trucks. Given Egypt’s young demographic structure, the relatively low penetration level (23 cars per 1000 people), a growing economy and booming industrial environment, we believe that significant demand is likely to continue to drive market growth in the medium term.
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This note was uploaded on 04/04/2012 for the course AASTT 24 taught by Professor Khlilaburass during the Spring '12 term at Arab Academy for Science, Technology & Maritime Transport.

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20070605_BF_112909 - 24 May 2007 GB Auto (Ghabbour)...

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