Algeria’s Car Industry Goals Come up Against Absence of Strategy
Algeria has announced its plan to increase its car production capacity to 260,000 by 2018, a goal that remains hard to attain in light of the absence of a clear-cut strategy.
The development of the car industry sector in Algeria was an attempt to reduce the country’s soaring import bill. Algeria imported 605,000 cars in 2012 for $7.3 billion. Yet, as the financial crisis bites in a country hard hit by oil price slump, authorities set up quotas for car importers leading to a drop in imports. Only 98,000 cars were imported in 2016 for a total cost of $1 billion.
The figures are but the tree that hides the forest. When considering that Algeria’s aim to develop a local car industry has turned into “disguised imports”. The car assembly plants in Algeria have a low local sourcing rates with most parts imported from abroad as semi-knocked down kits, thus further aggravating the country’s import bill with only tires being made in Algeria. Locally produced parts made up in 2016, only 10 to 15% of cars made in Algeria.
This made the price of cars “made in Algeria” much higher than new imported cars. The Renault Symbol made in Algeria costs some 200,000 dinars (€1,600) more than its imported counterpart, the Dacia Logan. The price of Hyundai i10 made in Algeria is also €2,000 more expensive than the price of the same small car in France.
Cars produced in Algeria in 2017 did not exceed 100,000 vehicles putting the country in the third place in the continent behind South Africa and Morocco, where Renault alone has produced 375,000 cars with a locally sourcing rate expected to hit 80% by 2020.
The perception of Algeria’s unfriendliness towards foreign investors is worsened by recent investment reforms that left unchanged a rule requiring 51% of national ownership of any project.
The 51/49 rule provides that at least 51% of the shares of Algeria-based companies must be owned by Algerian nationals residing in Algeria or by companies, which are wholly owned by Algerian resident shareholders.
The archaic banking system has also been pushing investors away. Algeria’s banks remain state-dominated and highly corrupt thus thwarting foreign direct investments.