• The formula used for determining the domestic content in vehicles is outdated. Currently, the percentage of each vehicle’s component— the standard percentage—is calculated, in an approximate manner, as an average of the commonly used percentage for each component. The standard percentages adopted are as follows: air conditioning system 9.54%, radiator 0.693%, radio cassette deck 2.53%, seats 5.397%, electric braids 3.205%, glass 1.48%, suspension system 4.4%, mufflers 1.08%, battery 0.468%, rims 0.9% steel - 2% aluminum, fuel tank 0.845%, carpets (floor lining) 0.813%, door binding 1.5%, tires 2.38%).  Thus, the total standard percentage for the most common components shared across many vehicles is 35.43%.  More so, the applicable percentage
• for calculating the contribution of the assembly line in the domestic content rate of a vehicle is 13%, and the applicable percentage for calculating the contribution of the local paint materials is 4% at most. Technological advancements in modern vehicles have pushed downwards the share of these components in the content of the vehicle. For example, the air conditioning system, which represented 9.540% of the content of old vehicles has decreased to 6% in modern vehicles.

• Decree No. 571 of 2019 issued by the Minister of Trade and Industry repealed Decree No. 371 of 2018, which established the domestic content percentage in the automotive industry and its method of calculation (Decree No.371 which was issued to complement the automotive strategy, disregarded the above-mentioned percentages, and relied on the percentages provided by the parent companies). The new decree also reinstated Decree No. 136 of 1994, regarding the assembly line’s required contribution in the domestic content rate, as well as Decree No. 907 of 2005 concerning the required domestic content rates in the automotive assembly industry. It should be noted here that while these two decrees have been in force for a long period of time, yet they did not result in industrial deepening in the automotive sector. More so, Decree No. 371 of 2018 was canceled without providing any viable alternative that can significantly and positively impact the automotive industry.

• Ministerial Decree No. 907 of 2005 led to the demise of the industry as it allowed car manufacturers to circumvent the local component requirements, by exporting either local components or finished cars. Manufacturers have abandoned the development of the local industry and concentrated their efforts on low value-added upstream industries.  As a result, car companies unjustly benefit from tariff incentives, and the State treasury loses billions of Egyptian pounds annually in revenues.

• Cancel Ministerial Decree No. 907 of 2005, and develop a realistic and comprehensive strategy to incentivize the automobile industry in Egypt, as well as other related upstream industries.

• While the free trade agreements with Europe and other countries grant full customs duty exemptions for finished cars and their parts, yet, other duties and fees continue to be imposed, including VAT, development fees, and domestic licensing fees for auto parts and spare parts. More so, there are flaws in the existing taxation and customs systems.

Abolish the development fee, the local license fee, and VAT on components and spare parts, which are imported for the purpose of use in the automotive manufacturing process; address the flaws in the customs and taxation systems.