In June, King Mohammed VI hosted Renault CEO Carlos Ghosn to celebrate the first export of Moroccan-assembled cars to France and Spain. The visit demonstrated the good relations between Morocco and French carmakers and aimed to develop the activity of Société Marocaine de Constructions Automobiles (SOMACA) for the local and foreign markets, notably towards the EU.
SOMACA is a Moroccan-French car company in which Renault has an 80% capital share. Philippe Cornet, the chief executive, announced that the company plans to export between 5,000 and 10,000 Logan cars a year to the EU, mainly to the French and Spanish markets. It is also planning to expand its exports to the Belgian and German markets by 2008. SOMACA will also export some 5,000 units to Egypt, Jordan and Tunisia. The success of further SOMACA operations is set to contribute to attracting new investments in car part manufacturers. The present success of Morocco’s automotive sector makes a marked change from the difficulties it was suffering just 5 years ago.
The Logan was introduced into the Moroccan market in 2006 and has become the leading brand in the low-cost car segment of the market, with some 13,000 units produced in 2006. SOMACA plans to assemble some 40,000 vehicles in 2007, including the Renault Kangoo, the Peugeot Partner, and the Citroën Berlingo.
Attracting investment
“It’s a first for the Moroccan automobile industry, which made a great leap forward with this announcement,” said Cornet. He also added that it is the first time Morocco has exported a finished industrial product to Europe apart from textiles. With a 19.6% share of the passenger car and LCV market, Renault leads the Moroccan market, which has grown by 17% since the beginning of 2005.
After Romania in 2004 and Russia in spring 2005, Morocco is the third country to launch Logan production. Renault has invested $30 million in the project. In fact, Morocco is the first country where the Group’s three brands — Renault, Dacia and Renault Samsung Motors — are sold simultaneously.
As part of a drive to attract foreign investors to reinforce the sub-contracting in the auto spare parts segment in Morocco, the Investment Directorate (ID) announced in May the establishment of an industrial free trade zone in the automobile sector, named Tanger Auto City (TAC).
“This new concept of specialized industrial zones aims to attract investors and automobile equipment makers employed by manufacturers especially those based on the European continent,” said Hassan Bernoussi, the director of ID, during a conference organized by the Moroccan MBA Association (MMA) in May in Casablanca.
The setting up of TAC reflects the government’s willingness significantly to improve what Morocco can offer in terms of foreign direct investment (FDI) options in developing sectors such as the automotive sector.
According to Salaheddine Mezouar, the minister for the automotive industry, the share of the automobile industry in gross domestic product (GDP) rose from 16.7% in 2004 to 19.6% in 2005. Mezouar noted that the automotive industry in Morocco encompasses 300 companies and provides 30,000 jobs and $2.5 billion in turnover. Considered more modernized than other industries, it generates 6% of total processing industry production and 12% of exports of industrial goods, which increased from $71 million in 1996 to $285 million in 2002. “The sector represents more than 40% of investments, or $130 million, which allowed the creation of more than 12,000 jobs in 6 years in the free trade zone alone,” said Omar Chaib, the zone’s commercial director.
Mohammed Ali Enneifer, the CEO of COFICAB, an auto cable company already based in the TAC agrees. According to Enneifer the production capacity in the Moroccan auto sector has risen by 4.3% year-on-year. “The integration of the Automotive City will help out existing companies by consolidating subcontracting and transferring foreign know-how to local companies,” he said.
Tanger Free Trade Zone (FTZ) is an example of the potential of the TAC. The FTZ has succeeded in attracting FDI due to its competitive legal and fiscal framework. Its special status allows for 100% foreign ownership, exemption from import and export tax and VAT on goods and on company tax for 5 years and a rate reduction thereafter. These benefits have attracted investors in the automotive sector, which is already the most developed sector in the FTZ.
Despite the recent announcement of car exports to Europe, the impact of TAC project may be limited on a local level. According to Bouchaib Barhoumy, the CEO of Yazaki, a Japanese company specialized in auto cable beams, the impact could be greater if, rather than spare parts, TAC concentrates on the development of the production of finished products to be exported.
