Algeria Buckles Up For Homegrown Auto Drive

Facing up to a sharp drop in oil prices, its main revenue source, Algeria has launched a "new economic model" to reduce reliance on crude by developing its domestic car industry

Once one of Africa's biggest car buyers, Algeria is embarking on an ambitious programme aimed at replacing hundreds of thousands of foreign imports with domestically produced models to keep drivers on the road.

AFP report continues:

Facing up to a sharp drop in the price of oil -- its main revenue source -- the North African nation has launched a "new economic model" which seeks to reduce reliance on crude sales.

One of the ways it hopes to achieve this is by developing its domestic automotive industry, which has been given incentives to produce more models after the government radically slashed imports.

As fears grow over US President Donald Trump's impact on global free trade, Algeria's move towards homegrown manufacturing is a possible sign of protectionism in the country.

Algeria in 2014 was Africa's second-largest car market in terms of sales, with more than 400,000 vehicles imported annually, but last year it cut import licences by half.

As a result only 83,000 units were brought in, representing around US$1 billion worth of sales -- a sharp fall from the US$7.6 billion Algeria spent on foreign cars in 2012, ministry of commerce figures show.

According to economist Abdelatif Rebah, Algeria's reliance on foreign cars had become "unsustainable and dangerous for our external balance".

"In 15 years, Algeria imported more than four million vehicles for close to US$25 billion, not counting the cost of importing spare parts," he told AFP.

According to the national statistics office, vehicle imports doubled between 1995 and 2015, as the economy and population grew.

Now, heartened by a similar domestic production drive in neighbouring Morocco -- which has a Renault plant in Tangiers producing 200,000 models a year -- Algeria is eyeing homegrown car manufacturing.

- 'Cannot ensure quality' -

The French motor giant opened a multi-million-euro plant in Paris's former colony in 2014, with an eventual yearly output set to hit 75,000 vehicles.

In November, Volkswagen signed an agreement with its Algerian sales partner for the construction of a vehicle assembly plant in Relizane, 320 kilometres (200 miles) southwest of the capital Algiers.

The plant will produce several models, including the Volkswagen Golf, SEAT Ibiza and Skoda Octavia as well as the Caddy.

Algeria's industry ministry says it has another dozen such projects in the planning, but experts have expressed doubts over quality assurance.

"Due to decades of deindustrialization... to benefit imports, the level of technological development in our country cannot currently ensure a sufficient level of quality sub-contracting," Rebah said.

He noted that opting to assemble cars from imported parts often ends up producing a more expensive final product than simply importing finished models.

Although the percentage of car parts manufactured locally is currently negligible, the government has plans to increase that proportion to 40-50 percent within five years.

It also plans to produce 500,000 units per year by 2019 -- a rate some analysts say will barely keep up with domestic demand, let alone helping to boost export stock.

Car industry expert Reda Amrani said Algeria had an "immediate" need for 600,000 private cars and another 100,000 industrial vehicles.

"Within two years of production starting at these factories, 20 to 30 percent needs to be destined for export," he said.