Algeria-Morocco: French car maker Renault moves to north Africa

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Renault will open a new manufacturing unit in the northern Moroccan city of Tangiers-Méditerranée, where the French group plans to manufacture up to 400,000 affordable vehicles per year. The group has also been negotiating with the Algerian government since February in order to establish itself on the Algerian territory. Renault wants to boost its competitiveness whilst improving its host countries’ employment sector.

Renault wants the North African market. Faced with an increasing number of international competitors producing vehicles at competitive rates whilst targeting local or regional markets, the French car maker is on its way to opening a new manufacturing plant in Morocco in less than two years. The group is also negotiating with Algerian authorities for a similar project in their country.

Currently under construction, the Tangiers-Méditerranée manufacturing plant, situated in the northern Morocco port city of Oued Rmel and not far from the enclave of Ceuta, will be open for business early 2012. Estimated to cost between 800 million and 1 billion euros, the plant will cover an area of 300 hectares, and eventually become the main manufacturing unit for Renault’s economy Dacia brand as well as a low cost version of their Kangoo utility brand.

Renault hopes to begin with an initial production of 170,000 vehicles per year. An annual capacity that is expected to hit an estimated mark of 400,000 cars. The vast majority of the vehicles will be sold on the local market and the rest exported. If everything go as planned, the manufacturing unit could also start building Logan, one of Renault’s high-end brand.

Algerian investment

Renault, however, does not intend to limit its north African expansion to only Morocco. Since February, the group has been holding talks with Algerian authorities to build another construction plant in Rouiba, a suburb of Algiers, the capital. The planned Algerian unit, which could cost tens of millions of euros in investment, would produce up to 50,000 vehicles per year and, as in the case of Morocco, will be directed towards the local market.

The Algerian unit will produce brands including the Logan, Sanderos and Symbol vehicles at low cost.

But Algiers is yet to give its go-ahead for the commencing of works. A go-ahead that may soon be announced following the thawing of relations between Paris and Algiers.

Renault is also expected to obtain approval from the Algerian interministerial investment committee, Comité national Algérien de l’investissement. Under Algerian law, the French group must enter into a partnership with a local partner, which should have a majority share, to become legal. Société nationale des véhicules industriels (SNVI), Renault’s Algerian partner, will in turn hand over the management of the site to the French group.

Facing strong competition on the international market, Renault was forced to part with a sizeable chunk of its property portfolio in order to quell its growing financial difficulties. And their North African strategy could see the company operating in a region with a high demand for low cost cars, whilst offering cheap labour at barely 20% of their wage expenditure in France, alongside a number of other fiscal benefits.

The French company will enjoy tax exemptions in Morocco , as a result of their Tangier-Med free zone status. The two north North African countries, on the other hand, are betting on benefiting from the project’s capacity to create jobs. The Tanger-Med manufacturing unit is expected to employ a minimum of six thousand people in Morocco.

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