Automotive News Europe - April 2020 - 14

AUTOMOTIVE NEWS EUROPE

AUTOMAKERS

South of the border
Renault, PSA, Daimler tap N. Africa for low-cost exports, rising local demand
PETER SIGAL

psigal@autonews.com

n their search for lower-cost production, European automakers are looking south across the Mediterranean
to North Africa, a vast region in which
relatively stable countries sit alongside
those grappling with political instability.
Renault Group, which makes about
400,000 cars annually at two factories in
Morocco, has long been the production
leader in North Africa. In recent years,
however, PSA Group and Volkswagen
Group have started production in the
region. Meanwhile, Daimler last year
signed a memorandum of understanding
to restart production of Mercedes-Benz
cars in Egypt after a four-year halt.
On the sales side, analysts expect the
region to substantially outperform the
global market in the next few years, although volumes remain small in North
Africa's main countries of Algeria, Egypt,
Morocco and Tunisia.
PSA in particular has focused an important
part of its production in North Africa. A
small factory in Tunisia assembles pickups
for the African market, and the automaker
has plans for a factory in Algeria with a capacity of 50,000 vehicles. It is in Morocco,
however, where PSA is expanding most
rapidly, centered on its new 557 millioneuro ($617 million) factory in Kenitra. In
September, PSA started to build the Peugeot 208, the group's best-seller, in Kenitra, largely for export to Europe. In December, it signed an agreement to conduct
some of its R&D in Morocco, and Segula
Technologies, an engineering company
that works closely with PSA, is opening an
automotive "center of excellence" in Agadir, which is about 260km southwest of
Marrakesh. PSA CEO Carlos Tavares also
announced in February plans to double annual capacity to 200,000 vehicles at Kenitra by the middle of this year, three years
ahead of schedule.
By the end of 2022, PSA and Renault
could have a total production capacity
of about 700,000 vehicles in Morocco.
If that happens Morocco would move
ahead of Poland.

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Moroccan media have reported that Renault, the country's biggest car producer, is considering raising annual capacity to 500,000 vehicles.

Morocco model
Morocco has been North Africa's model
for how to build an automotive industry, with generous incentives and policies that support investment, free-trade
zones and a new roll-on/roll-off port
facility in Tangier. Morocco's industry
is built on an export model, with more
than 90 percent of vehicles destined for
Europe, the rest of Africa and the Middle
East, and even South America.
"These things combined make it a very
attractive destination for manufacturing," said Joshua Cobb, an automotive
analyst at Fitch Solutions who studies
the African market, adding that "in recent years the country has been able
to build up a very good local supply
industry. I think this is one of the main
reasons we are seeing more interest in
expanding production in Morocco."
With the automotive industry -- and the
global economy -- shaken by the coronavirus outbreak, the country could
become more attractive, Cobb said,
because of its proximity to Europe. "I
wouldn't be surprised to see more investment in Morocco," he said.

Speaking about PSA's expansion plan
for Kenitra, Tavares said, "That will give
us more competitiveness in the smallsized cars that we are selling all over the
world." Part of that competitiveness is
due to the low cost of labor in Morocco,
which analysts say is about 25 percent
that of the nearest European country,
Spain, where the average auto worker's
wage was 26 euros an hour last year, according to Eurostat. Wages in Morocco
are also considerably less than in Eastern Europe, where rates range from 8
euros to 18 euros an hour, which is why
many automakers moved production
there from Western Europe in the last
few decades.
Renault has also taken steps to reinforce production in Morocco. In 2019
it became the sole owner of its factory
in Casablanca, where it builds about
80,000 Logan and Sandero cars annually (the cars are sold either as Renaults or
Dacias depending on the market), buying out PSA's remaining share. Moroccan media has reported that Renault will
increase annual production to 500,000
vehicles. Renault declined to comment
on the report.

APRIL 2020

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