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Foreign carmakers keen to set up factories

Article - June 27, 2012
As Algeria's car market expands, French and German companies are looking to manufacture in the country
Algeria is the second largest car market in Africa, it was recently revealed. Auto sales broke the record last year, hitting an all-time high of 320,000 units, compared to 230,000 cars sold in 2010.

Only South Africans bought more cars – and this was despite a ban on car loans by the Algerian authorities in a bid to rein in imports. Cars, electronics and food are Algeria’s main imports.

Initially the ban worked, reducing car imports in 2009, the year it was introduced, by more than 23 per cent. But by 2010 foreign cars were flooding back in the market.

And they continue to do so. According to Algerian customs, 102,720 units were imported during the first quarter of 2012, against 87,962 units during the same period of 2011 – a 17 per cent increase.

In its Q2 report on Algeria’s automotive sector, Business Monitor International (BMI) forecasts continued growth in sales of around 5 per cent a year, in line with a growing the domestic economy.

It says total annual new vehicle sales should exceed 375,000 units in 2016 – adding that if local car production takes off as it expects figures may have to be revised upwards.

The French brand Renault holds pole position, with Peugeot and Citroen also strong performers in third and fourth place respectively. South Korea’s Hyundai is in second place.

Meanwhile, German cars like the Volkswagen, Audi, Seat and Skoda, are coming up fast. Imports of German brands were up by more than 87 per cent in 2011.

Renault clocked up sales of more than 75,000 vehicles in Algeria last year with its Renault and Dacia models. The French automaker first came to the country in 1922 when it established a vehicle distribution business. It started producing vehicles there in 1959, but discontinued activity following nationalisation by the Algerian government ten years later.

A sales and marketing subsidiary, Renault Algerie, was established in 1997, focusing on Algeria’s domestic market. By 2009, Renault had captured almost a quarter of the market.

Both Renault and the Algerian authorities are eager to set up a factory to assemble Renault’s big-selling Logan and Sandero ranges. However, negotiations have been protracted because while the French company has wanted the plant to be at Rouiba, on the outskirts of the capital Algiers, the Algerian government, which would require a 51 per cent stake, wants it located in the province of Jijel to balance investment between the regions.

Once it is up and running the factory will produce 75,000 vehicles a year, rising in a second phase to 150,000 vehicles.

Negotiations have also been taking place between the authorities and Germany’s Volkswagen to establish a factory in Algeria.

Hyundai saw its share of the Algerian market rise from 14.4 per cent to 18.6 per cent last year, selling 52,185 vehicles. Peugeot sold 28,199 units, Chevrolet 24,716 units and Japan’s Toyota Motor 22,742 units.

India's leading carmaker, Maruti Suzuki, recently reported that its cumulative export to Algeria has exceeded 50,000 units, making the country its second largest overseas market.