The Egyptian government and Volkswagen Group Africa have inked a deal to construct and manage a new body shop and assembly factory in the East Port Said Automotive Zone (EPAZ).

This choice is a significant departure from the original strategy that positioned Nigeria as a possible location for the carmaker's assembly factory. The new Volkswagen-Egypt agreement was made at a time when Stallion Motors' Volkswagen assembly line in Nigeria had been idle for several years.

The Stallion Motors-owned Volkswagen showroom in Victoria Island, Lagos, is mostly vacant and has not seen a new model introduced in the area in several years. Experts stressed during the recent Nigeria Auto Industry Summit in Lagos that the Nigeria Auto Industry Development Plan, which has been approved by the Federal Executive Council but has not yet been signed into law, is essential to advancing the nation's automotive industry.

According to Daily Trust, Nigeria has been dragging its feet on the auto policy Bill for the past ten years, which has caused many original equipment manufacturers (OEMs) to abandon their plans to establish assembly plants there because there is no auto policy to protect their investment. Meanwhile, Egypt unveiled the Automotive Industry Development Programme (AIDP) in June 2022 to boost investment, local value addition, vehicle production, and emission regulations.

After a successful feasibility study, the Egyptian government intends to create a Special Purpose Vehicle (SPV) to develop the Body Shop and Assembly Line buildings, which Volkswagen Group Africa will use to make automobiles for the Egyptian market.