GB Auto project - GB Auto (Ghabbour) Automotive Industry |...

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GB Auto (“Ghabbour”) Automotive Industry | Egypt 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). The Egyptian Automotive Industry Strengths • Pent up demand for vehicles as a result of improved economic conditions and increased consumer confidence; • Significant growth potential domestically, given low auto penetration rates, and through regional exports to neighbouring countries; • Trend towards deregulation and tariff cuts, which further stimulates market demand for vehicles; • More proactive retail banking practice aggressively targeting consumer loans; • Large production capacities, however, not very efficiently utilized by the industry as a whole; • Low labour costs, which gives assemblers/manufacturers a competitive advantage. Weaknesses • Small market by international standards, which currently discourages long-term foreign investment, and makes it difficult to establish economies of scale for manufacturing; • Vulnerability to change in consumer sentiment; • Government legislation, as regards the automotive industry, sometimes unpredictable;
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• Weak after-sales services industry, mainly as a result of the lack of awareness about the importance of this segment; • Limited high quality automotive components manufactured within Egypt, which has
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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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GB Auto project - GB Auto (Ghabbour) Automotive Industry |...

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