GB Auto Surges on Car Assembler’s Deal With Geely: Cairo Mover

GB Auto climbed to the highest in more than four months after the Middle East’s biggest independent car assembler signed a contract to produce and distribute cars for Geely Automobile Holding Ltd.

GB Auto shares gained 4.1 percent to 24.57 Egyptian pounds at the 2:30 p.m. close in Cairo, the highest since Oct. 11. The stock has advanced 17 percent this year, compared with a 39 percent surge for the main index. The benchmark EGX 30 Index declined 2.4 percent today.

The Cairo-based company will sell passenger cars for Wan Chai, Hong Kong-based Geely in “select high-growth markets across North Africa,” it said in an e-mailed statement today. GB Auto has assembled variations of the Hyundai Motor Co.’s Accent, a four-cylinder sedan, in Egypt since 1995. That agreement is due to expire at the end of 2013, although the company will continue to import and distribute Hyundai vehicles, Ghabbour said in November.

The contract will enable GB Auto to “target a different segment of the population” because of the cars’ relatively lower price, Samir Murad, vice president of research at Kuwait-based NBK Capital, said by telephone. It comes “at a good time for the company as it allows them to build complete knock-down models in Egypt when Hyundai may not be renewing its assembly contract,” he said.

Complete knock-down vehicle kits allow car manufacturers to outsource assembly to other companies to cut costs.

GB Auto will start selling two Geely models in Egypt next quarter and then begin assembling vehicles in the third quarter, the company said today. GB Auto had about a 32 percent share of the Egyptian passenger car market in 2011, according to its estimates.

“Margins will not be high for distribution in 2012, but the prospects are good because the product has a low price point,” Murad said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE