Algeria buckles up for home-grown auto drive

Algeria has an immediate need for 600,000 private cars and 100,000 industrial vehicles, according to an industry analyst. AFP

ALGIERS // Algeria is embarking on an ambitious programme aimed at replacing hundreds of thousands of imports by making their own cars. Faced with a sharp drop in the price of oil — its main source of revenue — the North African nation has launched a “new economic model” which seeks to reduce reliance on crude sales.

One of the ways it hopes to achieve this is by developing its domestic automotive industry, which has been given incentives to produce more models after the government radically slashed imports. In 2014, Algeria was Africa’s second-largest car market in terms of sales, with more than 400,000 vehicles imported annually, but last year it cut import licences by half. As a result only 83,000 units were brought in, representing around $1 billion worth of sales — a sharp fall from the $7.6 billion Algeria’s ministry of commerce says the country pent on foreign cars in 2012.

According to the national statistics office, vehicle imports doubled between 1995 and 2015, as the economy and population grew. But this reliance on foreign cars had become unsustainable and dangerous for Algeria’s external balance, said economist Abdelatif Rebah. “In 15 years, Algeria imported more than four million vehicles for close to $25 billion, not counting the cost of importing spare parts,” he said.

As fears grow over US president Donald Trump’s effect on global free trade, Algeria’s move towards home-grown manufacturing is a possible sign of protectionism in the country.

Encouraged by a similar domestic production drive in neighbouring Morocco — which has a Renault plant in Tangiers producing 200,000 models a year — Algeria is now eyeing home-grown car manufacturing.

The French motor giant opened a multi-million-euro plant in the former French colony in 2014, with yearly output set to hit 75,000 vehicles eventually.

In November, Volkswagen signed an agreement with its Algerian sales partner for the construction of a vehicle assembly plant in Relizane, 320 kilometres south-west of the capital Algiers.

The plant will produce several models, including the Volkswagen Golf, SEAT Ibiza, Skoda Octavia and the Caddy.

Algeria’s industry ministry says it has another dozen such projects in the planning, but experts have expressed doubts over quality assurance.

“Due to decades of deindustrialisation ... to benefit imports, the level of technological development in our country cannot currently ensure a sufficient level of quality subcontracting,” Mr Rebah said. Assembling cars from imported parts often means the final product is more expensive than imported finished models.

Although the percentage of car parts manufactured locally is currently negligible, the government has plans to increase that proportion to 40-50 per cent within five years.

It also plans to produce 500,000 units per year by 2019 — a rate some analysts say will barely keep up with domestic demand, let alone help to boost export stock.

Car industry expert Reda Amrani said Algeria had an “immediate” need for 600,000 private cars and another 100,000 industrial vehicles.

“Within two years of production starting at these factories, 20 to 30 per cent needs to be destined for export,” he said.

* Agence France-Presse