Tuk-tuk putters but GB Auto stutters


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It is hard to overstate the change brought about on Egypt's streets by the tuk-tuk, the three-wheeled vehicle that offers cheap, rapid transport through narrow alleys and fields to the country's poor.

However, the Egyptian revolution is putting a big dent in profits at the Middle East's biggest vehicle maker.

A slump in economic growth is leading to a decline in sales at Ghabbour Auto, or GB Auto, which had until recently been motoring along at a fair clip. Net income during the second quarter fell 35 per cent from a year earlier to 50.5 million Egyptian pounds.

GB Auto had hoped to cash in on its position as the country's largest dealer of tuk-tuks, after traffic laws passed in 2008 required the phasing out of taxis of more than 20 years old in Egypt.

The company has reaped dividends from rolling out hundreds of cheap tuk-tuks, named after the puttering noise of their engines. But GB Auto's other lines of business are looking more shaky.

The company builds buses and distributes cars, lorries and tuk-tuks.

Sales of buses, lorries and tractors plunged in the wake of the revolution, leading GB Auto to report a 57 per cent fall from a year earlier in commercial vehicle sales to 91m pounds.

This trend will only get worse with dwindling number of tourists to the country requiring far fewer buses, according to a research note from CI Capital, the investment bank, which reiterated its "hold" rating on the stock.

"We believe this trend will continue in 2011 as a result of the broad slowdown in the Egyptian economy in addition to competitive pricing pressures," it said.

The company's shares have fallen 39.8 per cent since the start of the year, with the largest plunge seen during the unrest of January and February. GB Auto's shares rose 3.2 per cent yesterday to 27.37 pounds each.

Other lines of business, such as car financing and tyres, made steady progress, alongside modest growth in the company's sales of Hyundai vehicles in Iraq and Egypt.

The tuk-tuk accounted for the company's fastest-growing line of business, with sales up 65 per cent during the period. CI Capital projects sales to reach 102,000 by 2015.

But if it falls to a single vehicle to drive the company's profits, investors may wish to hitch their wagon to something less rickety.

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