According to Yin Tongyao, President of Chery Automobiles, multinationals do not have advantages in locally manufactured cars with prices less than $10,000 because of the rise in labor costs. "Thanks to our high-level cost-controlling capacity and increasingly growing development strength, in areas of economical sedans and minibuses, our brand has secured obvious market advantages," he said.

Chery is not China's first automobile company to link up with Egypt. In April 2005, Brilliance Auto, another Chinese car manufacturer, signed an agreement with the Egyptian BAG Group to produce Zhonghua cars. According to the agreement, the BAG Group would use the existing production lines in Egypt to assemble Zhonghua sedans, while Brilliance would cooperate through technology transfers, parts exports, technical training and after-sale services. Currently, the BAG Group has established two sales networks to sell Zhonghua cars, targeting Egypt and South Africa.

Meanwhile, China's Geely sedans will enter South Africa, another major consumer in Africa, early next year. The media reports that sample cars are being currently tested in South Africa. Geely's cooperation partner is the TJM Co., which has established 25 outlets in the country.

Major competitors

According to Sherine Adel, Office Manager of Symex International Automotive, sales agent of some Chinese brands in Egypt, including Geely, initially China's major competitors in Egypt were the South Korean brands.

While comparing Asian automakers in Egypt, she noted that because Japan started to manufacture cars in Egypt a long time ago, Japanese cars are well-known to the public. But their prices are comparatively higher. The South Korean auto industry, though entering Egypt later than Japan, had conducted very detailed market research and gradually expanded with relatively low prices. "Japanese and South Korean brands take a large market share in Egypt, but Chinese brands are on the rise," she said. She added that Chinese cars have the advantage of lower price, equal quality and new design.

However, because the establishment and improvement of both sales networks and after-sale service systems need time, Chinese cars still cannot directly compete with those from Japan, South Korea and Europe.

Chinese cars also lack sufficient advertising, with brand promotion relying solely on their African agents, and lack a clear market positioning and unified planning. Low- and medium-income consumers prefer to choose South Korean cars, which they are more familiar with and which operate a good service system. "This is a great challenge to Chinese brands that entered Egypt recently," she said.

Marketing Manager of CIG Akram El Sobky is, however, optimistic about the future of Chery sedans in Egypt. Egypt has a population of more than 70 million with a huge auto consumption potential. "The low-income group is the majority and what they need are economical sedans," said Sobky.

As competition in Egypt's banking industry is fierce, many banks are promoting car loans to low-income families in order to develop a new customer base. CIG has connections with some banks in this regard. "Egyptians are showing much interest in buying cars. I am optimistic about Chery cars in the Egyptian market," Sobky said.

In September 2004, Egypt lowered its import tariff on automobiles and parts. The tariff on cars with an engine capacity of less than 1.6 liters has dropped to 40 percent, which will further increase the country's car imports.