Morocco becomes Africa’s automotive industry hub
Casablanca - Morocco has become Africa’s automotive industry hub following PSA Peugeot Citroen’s opening of an assembly plant near Kenitra as Europe’s second-largest carmaker seeks to emulate Renault.
Located in the free zone, the $615 million factory, which is to be operational in 2019, will build 90,000 B-and C-segment vehicles a year and engines for markets in the region. It has a planned capacity of 200,000 units a year.
The plant is expected to generate 4,500 direct jobs and 20,000 indirect jobs, especially among component suppliers.
PSA invested 95% of the costs while Morocco’s Caisse des dépôts et de gestion (CDG) invested the remaining 5%.
PSA seeks to sell 1 million vehicles in 2025 in Africa and the Middle East, including 200,000 in Morocco. Africa is PSA’s third main market after China and Europe.
Renault in 2012 opened a giant factory outside Tangier to build low-cost vehicles. The plant is helping the French carmaker meet demand for its Dacia brand and introduce new models.
Morocco dethroned Egypt as the leading automaker in North Africa in 2012 and is second in Africa behind South Africa. By 2017, the North African kingdom is expected to become the world’s 19th largest vehicle assembler.
There are plenty of reasons behind this success. Morocco’s geographic location and state-of-the-art ports make it an ideal location for car manufacturers to set up plants. Morocco is ideally located for investors eyeing exports to Europe and Africa. The political and economy stability make Morocco a favourable platform for major automakers. US car manufacturing giant Ford announced in May that it would invest in Morocco by opening a regional trade base in Casablanca. It will also set up a buying office in Tangier free zone.
Ford’s announcement highlights Morocco’s importance in the automotive industry. The US company primarily seeks to benefit from low-cost component suppliers located in the free zones of Tangier and Kenitra after the establishment of Renault.
PSA already purchases up to $409 million worth of components in Morocco.
A skilled and competitive labour at a far lower cost than in Europe is also a key factor in luring automakers to Morocco, besides tax exemptions for 25 years provided most of the production is destined for export.
The government policy of attracting foreign investment in the automotive industry, spearheaded by the Moroccan King Mohammed VI, has certainly been a significant part of the kingdom’s overall strategy to diversify its economy.
In 2014, the automotive sector became the largest exporter with a turnover of $4.4 billion, overtaking phosphates.
Over the last decade, Morocco has been investing to develop a solid automotive ecosystem. The country has 150 component suppliers. By 2020, this sector is expected to employ 90,000 people, with two-thirds of the total in the industry and the remainder in services.
With a growing interest from other firms such as Volkswagen and Hyundai in this low-cost base, Morocco is working steadily to become Africa’s leading automaker.