Algeria shifts automotive industry focus to car parts manufacturing

Vehicle imports were capped at 79,000 units for 2016 and 55,000 in 2017. They are set at 50,000 this year.
Tuesday 06/03/2018
Employees of the French car maker Renault group working on a production line, in Oued Tlelat in the south of the Algerian city of Oran.
Employees of the French car maker Renault group working on a production line, in Oued Tlelat in the south of the Algerian city of Oran. AFP

TUNIS - Algeria is trying to shift the focus of its growing automotive industry to local manufacturing of vehicle components to bolster the industry's integration rate and create jobs.

Algeria is the biggest car market in the Maghreb and the fourth largest in Africa, official figures show. The North African country imported 4 million cars from 2001-16 at a cost of $25 billion, Algerian government data indicated.

The government is reviewing its automotive industry development policy. There have been plans to promote automotive production since 2012 when car imports reached a record of 600,000 units worth $7.25 billion.

"At this point, the automotive industry only consists of importing parts to be assembled here," Algerian Trade Minister Mohamed Benmeradi said. "The integration rate is only at 5%," he added, referring to the proportion of the locally manufactured parts used by foreign carmakers in Algerian assembly plants.

"At this point, the automotive industry only consists of importing parts to be assembled here. The integration rate is only at 5%."

Algerian Trade Minister Mohamed Benmeradi

The government came under fire for the high costs of importing vehicle parts made by foreign manufacturers at a time the government was trying to drastically reduce imports.

The value of imported car parts destined for assembly lines was $2.13 billion in 2017, figures from Algeria’s Customs service stated.

"There are too many requests from foreign carmakers to open assembly plants in Algeria but, as a government, we will not permit the foreign currency reserves to be emptied for the imports of car parts by foreign carmakers. We have to put this market in order," Algerian Prime Minister Ahmed Ouyahia said.

"That is why car assembly activity and the business of automotive suppliers must start together. Attaining a higher integration rate is the goal of our policy," said Industry Minister Youcef Yousfi, who took over the ministry last year, in an interview with state-owned El Moudjahid daily on February 21.

Yousfi slammed car assembly lines by foreign manufacturers as a "scam" and "disguised car imports."

The Ministry of Industry plans to limit the car assembly business to a few foreign manufacturers to reduce import bills and stimulate growth of the automotive components industry.

The government is trying to promote both the assembly industry and the activities of automotive suppliers with incentives linked to precise targets.

"Our objective is not the automotive assembly activity, even if it is a necessary stage from which to start. Our aim is manufacturing tens of thousands of automotive components. This is the kind of automotive industry we want to develop. That is why there are many measures and incentives in the finance law of 2018," Yousfi said.

Algeria will grant manufacturing operators exemption from value added taxes, customs duties and taxes on profits. It will grant them free land and ensure subsidised energy costs.

The incentives are linked to reaching an integration rate of 15% in the first three years of business activity and 40% in the fifth year to spur development and use of locally produced components.

At least 40 foreign car and other vehicle manufacturers have requested permits to join major car manufacturers Renault, Peugeot and Volkswagen to open assembly plants in Algeria, the Industry Ministry said.

"This is the price we have to pay to launch a true and competitive automotive industry. Do we want such industry or do we not want? We cannot have such business mature in one year," Hassiba Mokraoui, managing director of industrial development at the Industry Ministry, told Algerian Website TSA.

"It takes ten years of efforts," she added.

Mokraoui said: "There is no prior list limiting access to the automotive market. We are open to all offers."

The government reduced car imports from 600,000 units in 2014 to 300,000 units in 2015. Vehicle imports were capped at 79,000 units for 2016 and 55,000 in 2017. They are set at 50,000 this year.

Industry experts said the Algerian market needed to produce 500,000 units per year to satisfy demand. They said the country’s sprawling territory and the lack of reliable public transport services in most urban areas encourage the use of vehicles and keep the market growing.

Metro and tram lines in Algiers have been of limited use for middle-class residents as large-scale shopping malls and centres are on the city’s outskirts with no access to public transportation.

The expansion and upgrading of Algeria’s highway and road network will further contribute to vehicle market growth.