This week has been full of contradictory talk around rumours that Mercedes-Benz Egypt is looking to exit the local market, what the dealership’s stance is on the matter, and whether it will choose to actually exit the market.
Mercedes’ position is as it always has been. There have been assurances that Arab investors have already agreed with the company’s office in Germany and have received preliminary approval to transfer the dealership from the current local agent, Sami Saad—after he received the contract’s termination letter earlier this year—to begin a new era with a new agent and a new entity in early 2018.
Even though Mercedes-Benz Egypt’s office has refuted these rumours, they continue to spread through the automotive community—though without any tangible proof.
These events even began two months ago, when it was rumoured that one of the larger distributors in the automotive market announced that there would be an agreement between the German parent company and Al–Futtaim to hand the dealership in Egypt over to them.
Word had it that the company intends to adopt entirely new changes in the Egyptian market early next year, in addition to terminating Saad’s journey with the German carmaker.
It was also rumoured that there is an agreement regarding far-reaching changes in the distributors’ network and adding new players to the game.
These are the rumours—but what is the truth?
In 2004, Mercedes International, its representative in Egypt, Sami Saad, and the network of distributors agreed to halt assembly operations in the factory located in 6th of October City.
This followed the economic agreement that was signed between Egypt and the European Union, which stipulated that customs will be waived off cars of European origin.
The company had also decided to change the contracts for all its trademark dealerships around the world to replace the wording ‘exclusive agent’ with ‘authorised agent’.
Consequently, the company could have more than one dealership in the same country, which would create a kind of competition among agents—should there be no conflicts or differences in the services or models they provide—even when keeping the same prices. Parent companies authorising several agents in different provinces is usually the case in many countries around the world.
At the beginning of this year, the Egyptian agent was addressed. The adjustment was made and the new contract was sent in order to eliminate the thus far exclusivity, along with the expiry of the contract by the end of 2017. The contract has not yet been signed.
The question to be asked here is: “Will the nature of Mercedes Benz in Egypt change?”
I do not think that this adjustment will change the equation, especially as businessman Sami Saad, who has a great connection with the company in several aspects of manufacturing and sales, cannot be underestimated. He is part of the distribution entity through his strong partnership with a strong group of businessmen who have established the main distribution companies in Egypt. These include the Giza National Automotive (GNA), the Cairo National Automotive (CNA), and the Alexandria National Automotive (ANA). They are responsible for the distribution and maintenance of Mercedes Benz.
In the case that a new player joins the game, he must be inside that organisation whether we like it or not. These companies are the basis of brands in Egypt. It is difficult to establish a strong entity that competes against the existing entity while the Egyptian economy is currently falling on hard times.
The best example is when the Volkswagen group went through the same scenario with the Egyptian agent, the Egyptian Automotive and Trading Company (EATC). A new agent for trucks stepped onto the scene—a Turkish company that soon proved its inability to compete, pulling back after less than a year of working in Egypt.
Despite these dramatic events, the situation of Mercedes in Egypt is not so well. Mercedes and customs authorities have been butting heads since the beginning of 2016 due to problems with documentation—according to customs that is. However, the company is still importing cars and the most recent batch arrived in May. The company also communicates with customs on a daily basis in order to solve problems quickly and return to regular work.
The company made it clear that it welcomes a new a player into the game. The expectations show a great number of demands to enter into the distributors’ network that handles brands and are met with great acceptance and respect in the Egyptian market; however, this will not happen as easily as expected by some.
Mohamed Aboul Fotouh is head of the automotive section at Daily News Egypt.