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Now the automotive sector is looking at Northern Africa

April 24, 2020


Abstract : The EU automotive companies are always more attracted by the low production costs. PSA in Morocco produces the 208 car, the most sold one. But it reassures: European workers do not have to worry.

MILAN, Apr. 22 (Class Editori) - The trend was already taking place, but with the dramatic effects of the coronavirus on the sector someone believes (or fears) that the trend will accelerate in the medium term: Northern Africa could soon become a big automotive production site for European manufacturers, by offering, in particular, two advantages.

The first one is a bigger penetration in the African markets, whose vehicle registrations will grow in the next years. Moreover, in particular, there will be lower production costs for cars addressed to the European markets (due to the lower wages in force on the other shore of the Mediterranean Sea) which the European companies might exploit in order to regain profitability in Europe. In particular in those segments such as economy cars and other vehicles of lower costs, which would record no profit margins if they were produced in Europe. It will be important to understand the social and employment cost the EU countries will have to bear if this trend will effectively take place.

However, many European automotive companies have already invested in Northern Africa, in particular in those countries, such as Morocco, which are considered politically stable. Renault, the market leader in those countries, owns a factory in the North African country where it produces about 400 thousand vehicles per year.

Volkswagen is trying to develop itself in those areas and it has assigned the responsibility of the North African business to the Spanish subsidiary Seat. Meanwhile, last year Daimler signed a letter of intent in order to restart a plant in Egypt, which had been closed for four years. Last but not least there is PSA- Peugeot Citroen, the transalpine company, which will merge with FCA between the end of the year and the beginning of 2021.

The group led by Carlos Tavares (who will be the CEO also of the new PSA-FCA) owns a factory in Tunisia which produces pick-ups for the African market. In addition, it expects to activate a plant in Algeria able to produce 50 thousand vehicles per year. Above all, it has recently launched a 577 million establishment in Kenitra, Morocco, where the 208 car is produced, the vehicle most sold by the French brand and mainly exported to Europe. Tavares, before the Coronavirus outbreak, explained that the factory in Kenitra should manage to redouble the productive capacity (from 100 to 200 thousand vehicles per year) by the first half of this year, three years ahead of schedule. In total, by the end of 2022, PSA and Renault together will reach the production capacity of 700 thousand vehicles only in Morocco. European employees of PSA and FCA should not have anything to worry about because the two automakers have repeatedly said that the merger will not implicate any closure of the plants.

(Source:Class Editori)

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Keyword: automotive Northern Africa

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