Automotive News Europe - April 2020 - 15

AUTOMOTIVE NEWS EUROPE

AUTOMAKERS

Algeria's auto dreams
clouded by uncertainty
Algeria has been shaken by political upheaval and uncertainty since February 2019,
when protests against the government of
longtime ruler Abdelaziz Bouteflika resulted
in his ouster two months later.
One casualty has been Algeria's fledgling
auto industry. One by one, factories operated by Renault, Volkswagen Group (led
by Spanish brand Seat) and Hyundai-Kia,
with local partners, that assembled semiknockdown (SKD) and complete knockdown
(CKD) kits have been shuttered since last
autumn. The head of Sovac, an Algerian
company that was a majority shareholder in
VW's operations, was arrested last spring on
fraud charges.

Production at VW Group's factory in Algeria came to a stop in December
after the factory was denied a license to produce in 2020.
Both PSA and Renault have attracted
dozens of suppliers, large and small, to
Morocco. Some 50 percent of content
used at their factories comes from local suppliers, with a national target of
65 percent by 2022. Tier 1 suppliers that
have set up factories include Valeo, Faurecia, Lear, Marelli and Denso.

Chinese companies, including truck
maker Foton, which is planning to build
up to 2,000 electric buses a year. Zhejiang Geely Holding Group, the parent
company of Volvo Cars, is setting up
production of EVs in Egypt, as is Dongfeng Motor, which builds electric cars
with Renault in China.

"PSA is moving toward 100 percent local supply in Morocco," said Cobb. "That
shows how strong the local component
manufacturing industry is." PSA said it had
spent 850 million euros on sourcing in the
country in 2019, with 66 companies.

EV ambitions

Morocco's sales market has been dominated by Renault, with the budget Dacia brand holding a 31 percent share
in 2019 in a total market of around
143,000 cars and light trucks. The total market was down 9 percent in 2019
after three years of growth, but Fitch is
forecasting that sales in Morocco will
increase by 5.4 percent annually until
2022, as the economy grows and the
government adopts an expansionary
monetary policy.
Morocco is now hoping to move up the
value chain as a supplier of home-grown
engineering talent. That could be some
way off, Cobb warned, because the
country's higher-education system is not
yet up to that level. One slight stumble
has been Morocco's failure to attract a
third major automaker, a stated goal of
the government.
Egypt is another country seeking to emulate Morocco, but with a mobility industry centered on electric vehicles. Major
agreements have been announced with

APRIL 2020

An Egyptian company, Revolta, is getting
ready to produce charging stations, a solar farm, and eventually EVs; and a host
of similar agreements have been announced. "Egypt wants to be an Industry 4.0 capital, based on electric vehicle
production," Cobb said, referring to data-driven manufacturing. Many of those
EVs and electric buses are destined for
Egypt's future new capital city, rising between the Suez Canal and the Nile.
But one company, Daimler, isn't waiting
for future technologies to start production in Egypt. It signed a memorandum
of understanding with the government
last June to build a factory with local
partners and re-start production.
The plant will assemble SUVs, although
Daimler would not say which models,
with the first vehicles rolling off the line
in the second half of this year. Total
car sales in Egypt were about 127,000
units, a drop of 7 percent from 2018, according to industry group AMIC. Fitch,
however, expects sales to grow by
15 percent this year and an average of
6.6 percent until 2022. The market could
be a regional key for European automakers, because the government lifted all tariffs on exports from the EU in 2019. ANE

Algeria has blocked the import of CKD/
SKD kits since mid-2019, partly by imposing quotas on their total value. President
Abdelmadjid Tebboune singled out Renault in an interview at the end of February with the French newspaper Le Figaro.
Tebboune said many of the country's economic problems stemmed from unregulated imports of goods, which had "killed
domestic production."
"The Renault factory here is nothing like
the one in Morocco," he said. "How can we
create jobs when there is no integration, no
subcontracting?"
The reasons for the shutdown are complex,
said Arezki Daoud, lead analyst and president
at ME Risk, a consulting company. Algeria
sought to duplicate Morocco's success in the
auto sector, he said, but some of the operations were not set up in a sustainable way and
were tied to the country's oligarchs. That in
turn made them an easy target for prosecutors to arouse populist sentiment, Daoud said.
"It speaks of a corrupt regime, an administration that didn't have the proper vetting
system," he said. But he added that the auto
sector was reflective of a "generalized freeze
that is affecting the Algerian economy today."
Renault's factory in Oran halted production
at the end of February. VW Group's factory
in Relizane produced more than 53,000 cars
in 2018 for the Seat, Skoda and VW brands.
But that figure fell to just 25,000 in 2019,
because the carmaker reached its quota
limit of $600 million worth of imported kits,
a Seat spokeswoman said. Production came
to a stop in December as the factory was
denied a license to produce in 2020, she
said. VW Group is awaiting a decision by the
government on a future automotive strategy,
one that is likely to include a requirement for
local content, experts said. "We are open to
being flexible and adapting to the model,"
the Seat spokeswoman said. "We are still
interested in the market."
PSA Group has not yet opened its Oran factory, announced in 2017. A PSA spokeswoman said the automaker remained committed to Algeria, but was still awaiting
direction from the government regarding an
automotive strategy.
-- Peter Sigal

www.autonewseurope.com

http://www.autonewseurope.com

Automotive News Europe - April 2020

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