Taxis older than 20 years will be forced off the road and replaced with new cars by 2011. Fewer breakdowns might improve traffic, but the law may also make it harder for drivers to earn a living
The smell of Nescafé and cigarettes lingers in the morning air. Away from the crowded streets and harried businessmen, 50-year-old Adel Soliman leans his elbows on a plastic table in one of Agouza's many hole-in-the-wall ahwas, eagerly sipping his coffee as he reads the day's news before starting another 10-hour shift behind the wheel of his 1976 Peugeot 504. Parked in an alleyway nearby, the black and white cab has seen better days. It is more than 30 years old and there isn't much under the hood that hasn't been repaired or replaced more than once, but it still runs just fine most of the time, says Soliman with a grin, smoothing his hand over the cracked mirror. His pride and joy, the car is also his only source of income.
The fact that it only costs LE 20 a shift to fill his tank makes weekly breakdowns worth the trouble of driving an old car. Constant repairs are also cheaper than buying a new vehicle. Taxi owners like Soliman will be forced to replace their cars under traffic Law number 121 of 2008, passed last August. Owners of cabs older than 20 years have until 2011 to scrap their beat up Lada 2107s and Fiat 1300s for newer, more environmentally-friendly vehicles that break down less in traffic and aren't such an eyesore.
"It is unfair to judge the car based on its year of production. My car dates back to the 1970s and is in a better condition than most new cars." says Adel Soliman, a Cairo taxi driver.
According to Ministry of State for Environmental Affairs figures, the law will affect about 40,000 taxis more than 20 years old, which account for approximately 40% of the black and white taxis in greater Cairo. To help owners make the switch, the environment and finance ministries are in talks with local and international banks to offer loans, but the banks are being tight lipped about how the loans will be structured or when they'll be available, as are Ministry of Finance officials. Uncertainty surrounding the program and its timing has taxi drivers and owners alike nervous that assistance from the government isn't going to come any time soon.
Industry critics are also wondering if a deal for taxi drivers is the right move in the midst of uproar over the new traffic law's even less popular trailer load regulations. Truck drivers from across Egypt convened in Cairo in mid-February to protest a law forcing trucks to get rid of trailers hitched to the main vehicle, a rule they say will dramatically reduce their profits.
Quick to assure doubters, Ministry of State for Environmental Affairs Undersecretary Dr. Ahmed Aboul Seoud, who also heads the air quality department, says the deal will be announced as soon as the banks' bids have been evaluated, which could be as early as this month. "I think [the deal] will be revealed very soon because the Ministry of Finance finished the evaluation of the bidding and it is a matter of weeks until the start of the program."
Aboul Seoud says the trade-in venture is an extension of an existing project headed by the Ministry of State for Environmental Affairs to get taxis more than two decades old off Cairo's streets for good. The idea is to ease traffic and say goodbye to some of the city's worst polluting, gas guzzling vehicles. Over the last two years, the ministries of Environmental Affairs and Finance paid 1,000 cab owners LE 10,000 for their old cars, which they could use as part of their down payment toward a new car loan from the National Bank of Egypt.
"I sell Fiat used spare parts and most of my customers are taxi drivers. When they scrap all the [old] taxis in less than two years, I don't know what I'm going to do," says shop owner Ashraf.
The only stipulations were that the new cars had to be locally assembled, between 1,300 and 1,600 CCs and use natural gas as fuel. Owners also had to scrap their old vehicles. Many sold their cars' spare parts to back alley shops in downtown Cairo. Aboul Seoud says the program is a success because owners and drivers save LE 500 per month on gas and have to pay much less in repairs savings that can be put toward loan payments that range from about LE 750-850 per month. This 2009 program differs in that owners won't get a grant from the government for their old taxis, says Aboul Seoud. Instead they will be exempt from sales or customs taxes on the new vehicles.
The trade-in program was based on a pilot program run in early 2006 starting with 100 volunteers who were offered LE 15,000 for their old cabs. In exchange, they got loans from the National Bank of Egypt to buy vehicles that run on natural gas. Aboul Seoud says the ministry got so many requests to participate after the pilot program proved a success that it started the trade-in program, targeting 1,000 additional old black and white taxis.
Is it Feasible?
Soliman thinks it is unfair to judge the car based on its year of production. Instead, he says, the regulations should be based on the road worthiness of the car, regardless of its age.
"The condition of the car depends on the taxi owner and the driver, not the year of production," he says. "My car dates back to the 1970s, but is in a better condition than most new cars."
Soliman says he is saddled with debts of LE 80,000 after paying for his daughter's wedding. The 50-year-old still has two unmarried daughters and is worried that the new taxi regulations will make him sink deeper into debt. He owns his cab and used to rent it out for one shift a day, but now he says he is forced to work both shifts to pay off his debts.
According to Mohammed Ali Hassan, chairman of Automobile magazine and a media consultant for a number of automotive companies, it is extremely unfair to value the old cars at LE 10,000 because many of them have a higher market value. The ministries' plan to offer tax exemptions could also be problematic since the savings still won't cover the down payment for a loan.
Hassan is also skeptical about that the viability of the program. "I don't think the new taxi regulation will be enforced and this is why banks and the ministry are reluctant to give any official statements about it. The cab drivers won't be happy with it and people are frustrated; the government can't afford to make such a mistake now. Taxi drivers are already frustrated and could strike in response to the regulations," he says.
According to him, after taking into account gas, which can cost anywhere from LE 25-50 per eight-hour shift, and taxi rental, usually LE 30-60, a driver's total expenses for the month are often over LE 2,000. The owners are responsible for repairs that usually run more than LE 100 each week. Most owners and drivers manage to stay in the black every month, taking home a net profit between LE 900-2,500 depending on their luck. The trouble, say drivers, is that their luck changes month to month and even a LE 750 loan payment could make it difficult to put food on the table.
There is also the added expense of buying plates for new drivers and owners. In an attempt to control the number of taxis clogging the streets, the government stopped issuing new taxi registration plates. Entrepreneurs get around this by purchasing them on the black market. Gamal Saeed paid LE 20,000 to buy the plates from an old black and white taxi owner to put on his 2008 Daewoo Lanos. Saeed says he is looking to make money off of people who are tired of squishing into the back of cabs without air conditioning or any other creature comforts.
Tucked behind the American Embassy near Tahrir Square are the headquarters for City Cab and Cairo Cab, two of the three companies that run the city's yellow, metered cabs, which are marketed as a more comfortable and pleasant alternative to the black and whites. City Cab's chief financial officer is also skeptical of whether the trade-in scheme will work.
"The program is a good thing to get a lot of cars that break down everywhere off the streets. It will decrease traffic problems, but I think the measure point is the owners of old taxis. They don't have the ability to pay and drivers will have to pay [back their loans] for at least five years," says CFO Amr Abdel Magid Morsy. "The banks now are not financing anyone. You see now the banks are watching to see what will happen."
City Cab and Cairo Cab, which are owned by parent firm Instant Rentals, have a combined fleet of 843 cars, which can grow to up to 1,000 cars, as stipulated by the operating license. Each is fully equipped with functioning seatbelts, windows, air conditioning and the added bonus of more room to stretch out in the back, he says. But it's the call center that really differentiates Cairo's yellow cabs from their black and white counterparts.
Morsy says people choose yellow cabs because the cars have functioning meters so passengers don't have to negotiate with drivers. Long distance fares, for example to Cairo International Airport, also tend to be cheaper. The meter starts at LE 3.50 and charges LE 1.25 per kilometer. Common complaints for the company include busy telephone lines and late cab arrivals, admits Morsy, but black and white cabs can't compete with the call center, which customers can call 24 hours a day, seven days a week to book taxis.
Morsy supports the loan program in principal. However, he says he isn't sure owners of old cabs have the cash to put a down payment on a new car that costs anywhere from LE 60,000 to LE 100,000, depending on the model or other factors such as mandatory car insurance, let alone the monthly installments.
The Insider's View
At the edge of the Autostrad in New Maadi, taxis vie for the next spot at the pump. Edwar Makram, who's been a driver for five years, waits patiently for his turn while wiping the dust off the hood of his brand new 2009 Sahin. One of the lucky 1,000 to participate in the Ministry of Environment's program, Makram says his vehicle still has that new car smell. Unfortunately, it hasn't made a difference in how much people pay him to get around the city. He's actually making less thanks to his monthly car loan payments of LE 1,300, despite saving roughly LE 400 per month in gas and even more in the almost weekly repairs he was making on his old taxi.
"I make less because of the big installment," says Makram, who is prepared to lose money now by paying almost double the installment to halve the length of the loan. He's hoping that within two years he'll own the car and be able to keep that extra LE 1,300 for his family. Well, after he pays his brother back for loaning him money for the LE 31,000 down payment. He'll also have to replace his wife's gold, which he sold to cover the mandatory car insurance on the new vehicle.
So far, 2009 hasn't been promising for taxis, he says. There are fewer fares and people are watching what they spend. He's also worried about the effect using natural gas will have on his car because newer models are designed to use petrol and converting them can be hard on the engine.
A Dying Market
In the back alleys of Bulaq, an old neighborhood minutes from downtown Cairo, is Wikalet El-Balah. For more than 20 years, shop owners here have started their days ordering tea and shisha, content to wait for the inevitable clamor of broken-down taxis being towed their way. Taxi owners depend on the cheap, second-hand replacement parts found here, which would cost double or even triple at authorized dealerships, and on the inexpensive repairs for those who can't afford insurance.
Ashraf, who declined to give his last name, owns a stall that sells used parts for Fiats and is worried about how the new taxi regulations might affect his business. "I sell Fiat used spare parts and most of my customers are taxi drivers. When they scrap all the [old] taxis in less than two years, I don't know what am I going to do," says Ashraf.
Some of Ashraf's regular customers have already made the switch to newer cars and no longer need weekly repairs. "The government says they're going to compensate taxi drivers. What about us though? Do they even put us into consideration?" he says.
Another problem facing Wikalet El-Balah is that 37% of cars sold between 2006 and 2008 were bought using loans taken from banks to purchase the car, which means they're also insured. Hassan says every customer the banks win is one customer who doesn't need Wikalet El-Balah. People who buy new cars are also unlikely to buy used spare parts.
"Banks are making it easier to get auto loans. So people are replacing their old cars with newer and nicer ones, in other words, replacing the old spare parts shop with the new modern service station that is covered by the insurance," explains Hassan.
Hassan predicts that in three or four years, the used spare parts market in Wikalet El-Balah could completely vanish. "This is the case with a lot of traditional markets. The demand for a certain product declines over time and the traditional activity of the market vanishes gradually. This is happening now in Wikalet El-Balah," he says.
Undersecretary Aboul Seoud says the car industry in Egypt will see positive growth because of the new cars being purchased with car loans. As for the residents of Wikalet El-Balah, he says there are still about 2 million potential customers in greater Cairo.
"Even if old cars are repaired, their efficiency is lower and fuel consumption is higher, so we have to put limits on the age of the cars that you're running in Egypt. The first step was the taxis [] The new cars will be a symbol in Egypt," he says.
According to the Ministry of State for Environmental Affairs, there are 40,571 taxis more than 25 years old that are operating in Cairo alone. The ministry would like to see these outdated taxis traded in for newer vehicles that run on natural gas. Based on ministry statistics, this would reduce carbon monoxide emissions by more than 20,000 tons a year and nitrogen dioxide by 2,000 tons. The annual global emissions of carbon monoxide have been estimated to be as high as 2.6 billion tons, according to the United Nations Development Programme.
The ministry also projected that the switch from petrol to natural gas could save the government more than LE 300 million in subsidies. The government currently pays approximately LE 1.5 per liter for petrol subsidies. It costs a fraction of that to finance natural gas. It is estimated the program will help save 155 million liters of gasoline and 10 million liters of diesel yearly.
More than 40,000 families in Cairo depend on old cabs for their survival. Modernization costs money and the cab drivers say they are being asked to bear most of the cost. Though new vehicles mean fewer breakdowns and perhaps fewer traffic hazards and congestion, drivers like Soliman are worried about losing their means of income or being swallowed whole by debt. "I am 50 years old, and I don't have that much time left in my life to spend it in debt. I have kids in college that are about to get married," complains Soliman. "This is my country, but I don't feel like it is anymore because all the laws are against me."
By Osama Diab and Jessica Gray
© Business Today Egypt 2009
