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Message
From the CEO
We knew heading into 2016 that it
would be a challenging year, not just
for GB Auto but for the entire Egyptian
business community. From the start,
we were faced with the continuation of
a foreign currency crisis in our home
market and a tumultuous economic
background for our regional opera-
tions. Based on this, we aligned our
strategy throughout the year with two
fundamental aspects: aggressively
securing foreign currency required to
buildup inventory andpassing onprice
increases to end consumers.
Believing in the solid fundamentals of
the automotivemarket in Egypt, we em-
ployed throughout the year a calculated
price-passing strategy that consumers
seemedtotakeinstrideforthefirstthree
quarters of the year. We raised prices on
passenger cars by an average of 40%
between January 2016 and October 2016
and ensured we replenished our stock
of in-demand vehicles. Revenues for the
year grew 24.6% y-o-y and we captured
an all-time high market share of 45% in
April 2016, closing the full year at 36.8%
versus 26.8% the year before.
Wewere aware, however, that the salesmo-
mentumwe had experienced would not be
longlivedaswesatinwaitoftheanticipated,
historic floatation of the Egyptian pound.
The day came on 3 November 2016. With
the lion’s share of the true cost of foreign
exchange already passed on to consumers,
we rolled out another 15% price increase on
passenger cars between November 2016
and March 2017. As anticipated, unit sales
fell from almost 5,800 in October 2016 to
c.2,600 units in November and December,
andintoatroughindemandofjustover200
vehicles inFebruary2017.
Themarket was paralyzed as it adapted
to its new realities, supported by the
performance of our Motorcycle &
Three-Wheeler segment where sales
declined from9,000 units inOctober to
about 2,000 in November, but quickly
recovered to around 5,000 in Decem-
ber. This was the first indication that
consumer demand would come back.
To test the waters, we rolled out dis-
count pricing in a special sale the first
week ofMarch 2017, cutting prices tem-
porarily by an average of 10-15% across
our Passenger Car portfolio. Despite
cars still being priced at a premium to
October 2016 sticker prices, customers
quickly returned to our showrooms
with a significant number of walk-ins.
As we go into 2017, we are beginning
to see clear signs that consumers will
remain enthusiastic buyers of passenger
cars, motorcycles and three-wheelers.
At the price of short-term pain, we have
gained a new, healthier outlook on our
core market that leaves us optimistic
about the resilience of the Egyptian con-
sumer and theprospects of our business.
We believe our Motorcycle and Three-
Wheelers line of business is set tomake
an even faster recovery than Passenger
Cars considering three-wheelers both
serve demand for transportation and
are themselves revenue-generating for
their owners. After finalizing techni-
cal assistance agreements with Bajaj to
provide engineeringdataand technical
know-how and expertise pertaining to
the making of the Boxer 150 and Auto-
Rickshaw models, we are currently
on track to construct new component
manufacturing hangers, and purchas-
2016 ANNUAL REPORT
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Message From the CEO