Auto market: Cars lost 30 percent of their customers due to expats
With objectivity, confidence and accuracy based on numbers and papers in his hands, the Chairman of Abdulaziz Al-Mutawa Group of Companies Ahmed Al-Mutawa discussed many of the files on the Kuwait table these days.
From the impact of the Corona epidemic on the Kuwaiti economy and on all sectors, especially the auto sector, passing through the demographic file and ended with the amendment of the Civil Labor Law and Economic Reform, the leader of Al-Mutawa’s march is considered the former first Volvo delegate, and the accredited agent for Kia and “Kia” Changan in Kuwait, in his interview with “Al-Rai” is an opportunity , And expresses its approval of the treatments provided and provided by the government. A framework to tackle the Corona virus.
Al-Mutawa stressed the importance of reconciling the health side on the one hand and the economic aspects on the other hand, calling for benefiting from qualified expatriates instead of exporting them to other countries.
Al-Mutawa warned against the collapse in case liquidity is not pumped into the market, stressing at the same time that Kuwait is able to follow the example of other countries in ensuring the salaries of workers in the private sector for a period of 6 months, regardless of the nationality of these, thanks to the large financial reserves enjoyed by .
Al-Mutawa expected that the automotive sector will decrease by 25 to 30 per cent during 2020, and that companies will lay off some employees, noting that companies now have a large inventory of cars, which will lead to increased competition among them to provide offers, discounts and packages that benefit from it. . The customers, especially the fleet companies that work in the field of car rental, which he described as the biggest winner in this regard.
Here is the transcript of the interview:
What do you think about raising the issue of demographics at present?
- The demographics in Kuwait suffers from a major imbalance in the existing proportions, and it must be reconsidered, but through an objective study and the determination of a specific percentage for each nationality and not by escalation against the expatriate, because Kuwait needs it in all sectors.
To confirm this, we recall the issue of Kuwait's resort to employing medical personnel from Cuba and China to help tackle the Corona virus, despite the large numbers and expertise it possesses of national talent and expatriates, at a time when it turns out that the numbers of health and medical teams are not sufficient to meet the multiple and increasing needs in this the field.
As in health, Kuwait also needs expatriates in teaching, management, accounting, engineering, etc., in fact, due to the need for greater numbers of national talent in these areas.
We see the problem of demographics mainly residing in the greed of the residence merchants who brought in large numbers of marginalized workers and their traffickers and threw them on the streets upon their arrival in Kuwait. Here, members of the Council of Nation and other officials must determine who they mean to be immigrants, so are they qualified and highly experienced, or marginal work or group work that entered Kuwait through the residence trade?
We also point out that Kuwait should benefit from the current expatriates who have learned and raised on its lands, which may need them instead of benefiting from other countries.
• Are you in favor of amending your labor law?
When the National Labor Law was enacted, the legislator was cautious and acted according to the conditions prevailing at the time. Today, legislation must be amended in light of the current problem that Kuwait suffers from, due to the almost complete paralysis in all sectors, as a result of the Corona crisis.
There is no doubt that all or most of the companies in Kuwait violated the provisions of the current law, because they had to act before reaching the dead wall, in order to maintain its continuity.
It is true that the employee's rights are not affected even if they are satisfied with him, but in the current situation, many companies were forced to reduce salaries by 50 percent (among them the giant companies), which violates the law that did not address the current crisis or in any way, Here we see that the government and parliament have delayed the legislation in this regard, and in the case of resorting to the judiciary, there is no doubt that the matter will be left to the court to rule on it, so that the reason for violating the provisions of the law in this case is because of unprecedented exceptional circumstances.
How do you see the impact of the Corona virus on the auto sector and other economic sectors?
There is no doubt that the Corona pandemic is an unprecedented phenomenon in recent history that confused the global economy in all its sectors, especially as it coincided with the drop in crude oil prices, which made matters worse.
We point out here that the automobile sector in Kuwait is one of the sectors that was negatively affected by the closure of all sales outlets and car maintenance for about 3 months, which negatively affected the company's cash flows and increased available stock. .
This was accompanied by many other developments, the most important of which was the end of the services of some expatriates in the governmental and private sectors, the tendency of many companies to reduce the salaries of their employees, and the failure of banks and finance. Companies must give loans to expats, which has negatively affected their purchases, and the entire sector, especially since they make up about 30 percent of our purchasing power.
This comes with the difficulty of citizens and expatriates in the government sector obtaining salary certificates in order to obtain loans, financing and buying cars, due to the long-term closure that has continued to this day, which also affected companies ’sales in the market, especially since term sales represent 65% of the total In car companies. The auto sector is not the only one affected by the Corona crisis, as many sectors around the world have been affected, with the exception of medicines, sterilizers, clothing and protective equipment. Suffice it here to refer to the great losses incurred by the Kuwait Stock Exchange, whose index fell from 6250 at the beginning of this year to about 5000 points now.
• Do you expect plans to launch new models and open new stores?
On the contrary, I assure that we will do everything we can to stimulate sales during the coming period, including accelerating the launch of new models in the market. A large number of senior statesmen, due to its novelty and development, as we launched a new "Kia" in the market, which is the "K5" vehicle, and we will continue to develop plans for how to get out of the current crisis in the best way and with the least possible damage.
• What do you think of the government excluding the auto sector from support in the economic package?
In our opinion, the government did not intend to exclude any particular sector of support, and frankly, we do not envy the situation in which it found itself, and it relates to any "straw" that appears before it to get out of the crisis. An economic plan and package has been put in place to support the national economy in light of the great epidemic in which we live today. She also made sure to keep her doors open to everyone, including those working in the auto sector, by listening to the Car Dealership and other proposals.
The government has taken several measures that benefit the auto sector in one way or another, such as granting soft loans to all companies. However, the economic package that you have developed may need quick legislation, budget allocation in order to see the light and go into effect, and here the importance of the factor must be emphasized. Speed in making and implementing decisions, especially since "time is like a sword, if you don't cut it, you will cut it."
Likewise, the Central Bank of Kuwait reduced the discount rate from 2.5 to 1.5 per cent, and banks postponed the payment of loan and credit card payments for 6 months to citizens and residents alike, which helped to provide cash liquidity in their hands, at a time when the Public Authority for Industry postponed payment Rents of industrial, crafts, and service coupons for a period of 6 months, benefiting automobile companies, all of which are in favor of all economic sectors, including cars.
• When do you expect the auto sector to recover from the crisis?
The Corona crisis will have a major impact on the auto sector, and I personally expect it will need for a long time before recovering from the emerging crisis, and we expect things to improve during 2021 and 2022, but the total will not return to the size of the market in 2019 in the coming period soon.
I expect the size of the car market in the Kuwaiti market to drop by about 25 to 30 percent, from 90,000 cars in 2019 to about 65 or 70,000 cars, noting that there are expectations of other sources less optimistic that the decline will reach 45 percent Compared to last year.
Are production plans for electric and hybrid cars likely to continue?
There is no doubt that these plans will continue. Global factories have invested large sums in electric and hybrid models and will not be able to abandon them, but there may be some slowdowns in this framework due to developments imposed by the Corona crisis.
In this regard, I expect China to play a major role in the world of electric and hybrid cars during the coming period, with billions of dollars invested in pelleting and modeling plans, and I will most likely gain leadership in this field and withdraw carpet from Japanese and Korean companies and others, in light of the great technological development that Keen to put it in the hands of drivers.
• Do you expect car prices to drop?
- The price of any commodity in the market, including cars, is linked to supply and demand, competition between companies, and due to the closing of exhibitions for about 3 months, the companies' inventory increased significantly, which will increase the competition between them in providing attractive offers, reducing prices and offering competitive packages to customers In the market. .
We also expect that fleet companies that work in the field of car rental will benefit from the expected decrease in prices, as they may intend to buy hundreds of cars at attractive prices, which is their right in light of the competition that will intensify in the market during the coming period, and stop the companies efforts to compensate for long sales. relatively.
What do you think is required to support the auto sector in the coming period? Will we see a decrease in the number of workers in the sector?
- As I mentioned earlier, some decisions taken have reduced the size of the auto market during the past five months to approximately 50 percent, and we expect things to improve to 30 percent by the end of this year.
Therefore, we require banks and finance companies to grant the required loans to expatriates, and for the state to inject liquidity into all economic sectors, contrary to what the Federation of Banks announced that banks will not distribute profits for the current year, which leads to the withdrawal of some liquidity, noting that the union has the right to make a recommendation, But the decision to distribute profits or not will be entrusted to the general assemblies of the banks.
Therefore, the most important element that the state must work on in the coming period is to pump liquidity, in a manner that leads to the rotation of the wheel of the national economy, especially as the current crisis coincided with the drop in oil prices, and here the concerned parties must pay attention that the obstacle will be greater than the crisis arising in the case Draining liquidity from the market, which may strike all active and inactive sectors at the same time.
Yes, the number of employees in car companies will undoubtedly shrink, because the volume of sales has decreased significantly, because if you look at the salary item in it, it is one of the largest elements in terms of expenditures and must be reduced in order to continue, with the indication that car companies are currently setting budgets Quarterly reviews every 3 months, not yearly, as usual.
Here we draw attention to the need for the state to try to coordinate the health aspect with economic activity to work to achieve a balance between limiting the spread of the Corona virus and at the same time preventing the national economy from collapsing, which is not an easy equation.
We point out that the recent period, due to the continuous closure in most sectors, and despite the great efforts made by the state, the Red Crescent and charities to support groups affected by this crisis, we have witnessed a terrible rise in the number of suicides among residents of Asian nationality, due to the loss of their ability to Securing their daily food on the one hand, and covering the expenses of their families in their countries on the other hand, which indicates the catastrophic results that we may reach in the event of a mismatch between the health aspect and economic activity.
How do you see economic reform?
It should be noted that reform requires time, culture, will and responsibility to manage crises successfully, and it must be borne in mind that reform is development, not revolution, and must start from future generations, especially young people, and build culture and great knowledge that have the ability to make them bear the responsibility of leading the state and the economy in The future, which is a matter of relatively long time, in light of the complex files that exist in Kuwait, so where do we start demographics or residence dealers or the number of employees ...
Here, I do not feel frustrated by the design of the state, but I confirm that there is a need for follow-up and accuracy And firmness at the same time, where we must focus on teaching and studying and building new generations with a culture completely different from those that exist today at different levels.
There is no intention to include "Al-Mutawa" at this time
When asked about the listing of Al-Mutawa Group on the stock exchange, Ahmed Al-Mutawa indicated that it is a 100 percent family-owned closed joint stock company, and today it is managed by the second generation of Al-Mutawa. The family, has begun to introduce third-generation children to the boards of directors. Al-Mutawa explained that in the current period or in the near future, there is no intention to include it in the Kuwait Stock Exchange, which may be necessary in the future.
Al-Mutawa considered that most of the existing family companies end in the third generation, and a few of them continued until the fourth generation, stressing that the best way to maintain its continuity lies in its inclusion and making it a public joint stock company, while the family maintains the largest share in it and the main decision in it. He pointed out that listing is usually done for family companies when shareholders are unable to pump the liquidity required to expand the business, so that other shareholders are added to increase the company's capital and involve them in profitability.
"Volvo" gives up on Badr Al-Kharafi from "Tayeb Khater"
Al-Mutawa said that "Volvo" is the first agency obtained by his late father, Abdulaziz Al-Mutawa, and it is represented in more than 60 countries for more than 60 years, noting that "Al-Mutawa" is still the authorized dealer. The Volvo brand in terms of transport vehicles and trucks.
He pointed out that the abandonment of the Volvo Cars Agency occurred in December 2018, after Al-Mutawa studied the situation, and considered that the investment you are making is not commensurate with the volume of sales that Volvo cars achieved in the local market, noting that he traveled to Vienna and met with the brand officials who were surprised When he assured them that their visions of the Volvo brand were inconsistent with Al Mutawa's vision, they chose to focus on better long-term opportunities.
He added that he had given Volvo officials a year to search for a new local dealer, and that shortly after there was contact between his son and Bader Nasser Al-Kharafi who inquired about the issue of abandoning the Volvo Cars brand, stressing that in the event that Al-Mutawa does not want to abandon it, he will not enter the matter at all.
Al-Mutawa added that after that he met Bader Al-Kharafi and assured him that he would abandon the Volvo Agency “Tayyip Khater”, and blessed him and wished him success, to be one of the smoothest car dealerships in Kuwait and will be completed at a later time, stressing that he devoted all the capabilities and expertise of the group To cooperate with Al-Kharafi so that customers are not affected during the transitional period.
Al-Mutawa explained that he sees "Changan" as a distinctive alternative to "Volvo", as it happened when he received the "Kia" agency 20 years ago, noting that he dedicated the brand to the exhibition Mohammed bin Al Qasim in Al Rai. Fully after the transfer of the "Volvo".
The state is not obligated to compensation
Al-Mutawa stopped article 25 of the Kuwaiti constitution, which stipulates that the state guarantees community solidarity in bearing the burdens resulting from public disasters and misfortunes, and compensating those injured by wars or performing their military duties. He stated that, according to Dr. Adel Al-Tabtabai, it can be said that the text of Article 25 did not respond in the mandatory manner, but rather that the context was stipulated in the text to ensure the state to compensate the injured as a result of war damage or due to the performance of their military duties, which means that the state is working as much as it can to compensate it, But if she does not do so, and she cannot experience any constitutional failure due to her position. He added: "Adel Al-Tabtabai's opinion applies to the current situation and the negative effects of the Corona epidemic and the state's role in doing everything in its power to compensate those affected by the repercussions of the crisis."
Covering half of "special" salaries
Al-Mutawa stressed that the state has sufficient capacity to cover at least 50 percent of the salaries of the private sector for a period of 6 months, as some European countries have done, but it must set priorities and support the economy, and it must constitute a protective umbrella for all economic sectors, and all workers In it regardless of their nationalities, in light of the financial reserves and the large income that it gets from its investments, knowing that the support should not include only the citizens who get comprehensive. Take care of the state.