Egypt promises five-year purchase guarantee for local EVs

From the newsletter

The Egyptian government has announced it will guarantee sales for five years to electric vehicle manufacturers who establish local production. It is the latest in a long lineup of incentives that Egypt is rolling out to investors to boost local EV production. The Egyptian market, one of the fastest-growing in Africa, is dominated by Chinese EVs.

• If actualised, it would mean that EV firms would have surety that they will sell all the vehicles they produce, which could encourage them to scale investments in local production. This would boost Egypt’s manufacturing industry and create jobs.

• The Egyptian market is however likely to absorb most of the EVs that are made locally — not least because of vehicle import restrictions, which are expected to create scarcity. Egypt recently imposed bars on the import of vehicles, specifically limiting individuals to importing one car every five years.

More details

• Manufacturing of EVs in Egypt is at a nascent stage, with the country mainly relying on imports, especially from China, to meet demand. The North African country is actively working to establish itself as a regional hub for EV manufacturing through incentives such as tax breaks and subsidies.

• Existing EV manufacturers include El-NASR Automotive Manufacturing Company, a state-owned automotive company. Raya Auto, a subsidiary of Raya Holdings, is also assembling and manufacturing modern vehicles including EVs in the country.

• GV Auto, a subsidiary of GV Investment Group, is a new entrant aiming to start EV manufacturing in Egypt. They have partnered with the Chinese automobile manufacturer FAW Group to produce affordable EVs locally, with production expected to start this year. A potential local EV maker is Alkan Auto, a subsidiary of Egyptian International Motors. The firm has signed an agreement with China's BAIC to establish an electric vehicle factory in Egypt. 

• Egypt’s efforts to attract investment in its automotive sector are bearing fruit, with a number of foreign companies announcing plans to open local factories. The latest is Jetour International Motors, a Chinese automaker owned by the Chery Holding Group. The company recently signed a deal with Egypt to make the Jetour T1 and T2 models locally. 

• Other incentives that Egypt has announced include subsidies of up to EGP 50,000 (approximately $2,500) on the purchase of the first 100,000 locally manufactured EVs, especially those capable of covering over 400 km on a single charge. Public sector companies in Egypt are required to replace 5% of their fleet with EVs on a yearly basis.

• Authorities are also reviewing and introducing fresh incentives, including increased tax and customs breaks and investment incentives for companies that localize EV production. Existing incentives include a 2% flat customs rate on imported equipment and a five-year exemption from stamp tax and registration fees for incorporation and financing contracts.

• EVs still constitute a minuscule portion of Egypt's overall car market, making up only around 0.1% of the more than 5 million private vehicles. However, demand is projected to grow due to price drops. In 2024 for instance, Egypt saw 2,938 EVs sold, nearly doubling the country's total count to 6,150 licensed units. 

Our take

• Balancing local production with continued imports will require careful policy adjustments to avoid market distortions. This is because the recently introduced import restrictions could increase the cost of vehicles and slow down demand. 

• While demand for EVs is rising, Egypt must rapidly expand its charging infrastructure to support widespread EV adoption. Further, ensuring affordability remains key—if locally made EVs are priced too high, adoption may be slower than anticipated. 

• Egypt’s approach could inspire other African nations to introduce similar incentives, fostering local EV production across the continent. Ideally, governments should encourage state-owned institutions, which often have significant spending power, to incorporate EVs in their fleets.