22 déc 16

Automotive market Algeria : From trade to industry

The least that can be said is that the Algerian car market has made a significant U-turn towards an as yet very young industrial phase. Let’s have a look at what made this happen, and what to expect in 2017.
To understand the winding path of the Algerian automotive market, it is necessary to go back to 2014, which saw the introduction of a specification which redefined the technical make-up of a vehicle on three levels: safety, comfort and powertrains. It was above all the safety aspect which was emphasized by authorities, in order to oblige importers to equip the vehicles they were selling on the Algerian market with safety equipment such as dual airbags, ABS, speed regulators and limiters, safety belts with isofix anchoring, head restraints on all 5 seats, etc… This had a severe impact on supply as manufacturers needed time to adapt to the new situation. When 2015 arrived it brought with it quotas with import licences, whose first consequence was to see the importer/distributor network reduce  from 178 in 2014 to around 40 in 2016 – in other words in just two years.
Price increases
Many of the sites dedicated to car distribution had to close their doors either because they were unable to conform to the new demands in terms of specification, because they were not granted the import licence. These closures extended to the various networks of authorized dealers, which represented the brands throughout the country. The implementation of the quota system, even if its objective was to reduce the volume of imports because of the collapse in the oil price, had the disastrous consequence of leading to a succession of redundancies, putting several thousand people into unemployment. Along with this painful episode, the offering of new vehicles during this year, 2016, has not exceeded 100,000, while under normal conditions the market can absorb around 400,000 units. It can be said that the pressure is bearing down on the vehicle market at the moment, knowing that mobility needs are far from being resolved. On top of this, the scarcity of vehicle supply allied to the decrease in value of the national currency, the Dinar, on the currency exchange markets, has caused prices of those models which are available, to soar. According to segment, these price increases range from 25 to 80%.
Algeria as vehicle production industry
When the implementation of the specification took place in 2014, dealers were obliged to set out an industrial project for the production of vehicles and spare parts, by January 2017. The first to plunge into this was French manufacturer Renault, which has been assembling the Symbol for the past two years at Oued Tilat in the Oran region. This assembly site, inaugurated in 2014, was at first operated by a team of 250 employees, who were to produce 25,000 units per year. By the following year, the workforce had moved up to 513 persons, to produce a total of 50,000 vehicles, to cope with the growing success of the Symbol on the Algerian market. During the recent Oran Motor Show which took place from December 7th to 17th, Renault Algeria Production announced that a third team was being added, bringing the number of employees to 800. This workforce has an average age of 32, and 73% of persons are aged between 20 and 35. And, it should be added, the employees of Renault Algeria Production have benefited from 50,000 hours of training. In another domain, the 17th Oran show was noted for the announcement of the production of a third model, the Sandero Stepway.
This 2016 Oran Motor Show thus also underlined the new trend adopted by the automobile sector in Algeria, with other brands announcing their industrial ambitions. This is the case for CIMA Motors which, via its TMC subsidiary, responsible for producing the passenger car range for the highly ambitious South Korean manufacturer, enabling it to position itself for the long term as a major player on the Algerian car market. TMC thus announced an annual production capacity of 60,000 units which will increase to 120,000 units in the 5th year. Eight models are scheduled for the production line of this factory located at Tiaret, in order to ensure a presence in the most popular market segments. Still with Hyundai, the range of heavy and utility vehicles is taken charge of by GMI (Global Motor Industry) whose assembly site is at Batna. This factory currently has a capacity of 10,000 units per year.
The Algerian car market is therefore at a real turning point, taking into account other projects such as that of Diamal, which represents Chevrolet, Opel, and the trucks of DAF and Fuso. This company is on the point of inaugurating a production site. At the Oran Motor Show, Nissan also confirmed its intention of moving to an industrial phase in order to assemble 4 of its models. Peugeot and Sovac were the great absentees, especially as both of these large distributors are at an advanced stage with their respective projects. Sovac, which represents brands of the Volkswagen group on the Algerian market, has signed a partnership agreement with the manufacturer to produce models from the Volkswagen, Skoda and Seat ranges at Relizane, while Peugeot is well on the way to producing models of the PSA group in Algeria.
The great question which remains in all minds involves the ability of these major industrial projects to win the battle of integration, the only factor for success which is capable of propelling Algeria towards effective and profitable industrialization.

Authored by: Céline Gilson