Automobile industry crisis prompts Algeria to import used vehicles

The dominance of the private sector over the automotive sector has led to low-quality vehicles sold at higher prices compared to the quality and prices of the same brands in other countries.
Saturday 07/09/2019
Struggling sector. An employee works on a  production line in Oued Tlelat in the south of the Algerian city of Oran. (AFP)
Struggling sector. An employee works on a production line in Oued Tlelat in the south of the Algerian city of Oran. (AFP)

The Algerian government is adopting a law allowing individuals to import used cars and vehicles to contain the crisis regarding vehicle assembly in the country because of judicial restraints.

Algerian Minister of Commerce Said Djellab said a measure defining conditions for importing used vehicles is under study with consultation with government committees, suggesting a return to previous regulations to meet local market demands.

The government is expected to ratify the law so it be in force by the beginning of the new year to restore order to a sector that had become a sham under the Bouteflika regime.

Many automotive manufacturing and trading institutions have been seized by the courts and their owners placed in custody on suspicion of corruption, smuggling and looting of public funds. That includes Mahieddine Tahkout, owner of the dealership of the South Korean giant Hyundai; Mourad Oulami, owner of the Volkswagen dealership; and Mohammed Hasnaoui of the South Korean Kia dealership.

Import lobbies had pressured the Algerian government to ban the import of vehicles less than 3 years old by individuals. With the introduction of automotive assembly activities in Algeria in 2014, those automotive importers have had a virtual monopoly over the sector.

The dominance of the local private sector over the automotive sector has led to low-quality vehicles sold at higher prices in Algeria compared to the quality and prices of the same brands in other car-producing countries. Many installation and assembly plants in Algeria have experienced a severe crisis since the arrest of their owners and the disruption of importing operations.

A government source said the government intends to restore the previous import system because most of the institutions in the automotive assembly sector did not deliver a decent return for the public treasury.

Official estimates place the rate of integration of the automotive assembly sector in the national economy at 10%, which is considered low, in addition to the lack of transparency in the production cycle and suspicions regarding the billing of imported parts.

The source, who requested anonymity, pointed out that the government is developing “precise” terms and conditions for the sector to avoid the mistakes of the old import system and to develop strict mechanisms for moving capital and funds and ensure after-sales services. The government is also hoping that new technical standards will end cross-border counterfeiting and theft gangs.

Recent official government statistics indicate that local car assembly factories supplied 100,000 vehicles to the Algerian market but this did not meet the growing demand in the sector.

A source said all activities have stopped at local Hyundai, Volkswagen and Kia factories and that dealerships stopped taking orders because they would not be able to fill them. The companies are said to be in such bad shape that customers who paid for their orders are having difficulty recovering their money, the source said.

The former head of the Automobile Dealers Association Youssef Nebache described the sector as a “big lie” that had sustained the political system for years, despite damage to the public treasury and the Algerian market.

The sector benefited from tax and customs breaks, such as exempting its activities from paying the value-added tax estimated at 17% and the customs rights estimated at 30%. The companies also did not have to pay trade fees and benefited from preferential pricing for energy and land for the factories.

Investigations of the Bouteflika regime uncovered the involvement of former prime ministers, ministers and high-level officials in cases of corruption related to the automotive installation and assembly sector with links to powerful business lobbies.

The Algerian automotive market is considered among the largest on the African continent with a top demand of 600,000 vehicles, which puts tremendous pressure on the public treasury by exposing it to severe foreign currency bleeding. The sector consumes about $6 billion a year in expenditures.

To reduce the import bill, the government in 2014 redrew the lists of the beneficiaries of advantages accorded the sector, using the pretext of starting an automotive assembly sector in the country.

The sector ended up in the hands of businessmen close to the government leadership. Since then, there has been a virtual monopoly of the market by those lobbies, with the usual consequences of exploding prices and fraudulent manipulation of product quality and of the privileges granted to them.

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