New Telegraph

Africa begins to emerge as car industry hub

After the European car industry moved much of its production into Eastern Europe, some believe the next step is Africa, both for production and a growing consumer market.

 

Morocco is one of several African nations that has boosted vehicle production in recent years. Morocco is an emerging automotive manufacturing hub, while South Africa has a history of carmaking. But multinational vehicle manufacturers are also setting up production plants in Angola, Ethiopia, Ghana, Kenya, Namibia, Nigeria and Rwanda, and locally owned African producers are starting out on this road less traveled.

 

Africa has more than a billion people, 17 per cent of the world’s population, but accounts for only 1 per cent of cars sold worldwide, compared with China’s 30 per cent, Europe’s 22 per cent and North America’s 17 per cent, according to the Paris-based International Organization of Motor Vehicle Manufacturers (OICA).

 

Africa has on average 44 vehicles per 1,000 people, compared with the global average of 180 and 800 in the United States, according to consulting firm  McKinsey & Company.

Morocco, South Africa lead the way in 2018, Morocco overtook South Africa as the biggest African exporter of passenger cars with exports in 2019 at $10 billion. The two countries mainly make cars for foreign markets, but also have relatively large domestic markets.

VW, Mercedes- Benz owner Daimler and BMW are among the biggest car companies in Africa, making up over 90 per cent of all passenger cars produced and a third of the cars sold in South Africa in 2019.

 

Meanwhile, about 80 per cent of the 400,000 cars produced in Morocco are sold to Europe, with France, Spain, Germany and Italy the main destinations.

 

The Moroccan car industry directly employs 220,000 people, most of whom work for 250 suppliers. Annually, Moroccans buy 160,000 new cars, which is a small number for a population of 36 million. In September, Stellantis — created in January 2021 after a merger of Fiat Chrysler and PSA — announced that its supermini electric car Opel Rocks-e would be produced at the PSA plant in Kenitra, northeast of Rabat, with a capacity to make 200,000 vehicles a year.

 

Stellantis, the world’s fourthlargest car manufacturer, plans to increase spending on parts made in Morocco from €600 million to €3 billion by 2025.

 

BYD, a Chinese electric vehicle manufacturer, signed a memorandum of understanding with the Moroccan government to also open a plant in Kenitra, while Hyundai, the Korean carmaker, is reportedly considering setting up shop in Morocco after leaving Algeria.

 

Meanwhile, STMicroelectronics, a US company based in Casablanca, has just launched manufacturing of the main transmitter for Tesla vehicles in Morocco.

Proximity matters

Perhaps the main reasons Morocco has been a success story are its location close to European markets and the  free trade agreements it has signed with Europe, the US, Turkey, the United Arab Emirates and elsewhere.

“The Renault and Peugeot plants in and around Tangier are there because they got super favorable deals — on land, infrastructure, customs facilitation to invest in a country that is a very short ferry ride from Europe,” Joe Studwell, with the Overseas Development Institute in Cambridge, told DW.

 

“This logic does not work for sub-Saharan Africa where it is all about the local markets,” he added.

Locally based suppliers and staff and supplies are also important. Renault, for example, sources parts from seats to axles from local suppliers. Local content accounts for 60 per cent of the final product. Meanwhile, labor costs are about a quarter of those in Spain and lower than in Eastern Europe.

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