Algeria braces for another car industry fiasco

Algeria wants to develop a car industry but it wants it fast and without meeting the pre-requisite: a competitive industrial cluster or ecosystem of local part suppliers.

In 2019, after his election, Algerian President Tebboune had criticized car industry professionals in his country accusing them of practicing “disguised imports” due to the very low sourcing rate.

In October, he said Fiat would open an assembly plant in the country with the first cars to be produced as fast as March 2023. The date was put off to late 2023 by his industry minister.

The promise came amid a worsening shortage of cars in the Algerian market due to an import ban that lasted for 2 years until it was lifted last November.

Many plants had stopped, including Renault and Hyundai assembly plants which were dedicated to supplying the local market.

Now, Tebboune wants exports as well in an Algeria that is punching above its weight, unable to carry out the required reforms.

Instead of a top-down approach, Algeria had better start with a bottom-up strategy that consists in encouraging entrepreneurship in its state-dominated and rent-based economy.

The lack of local companies that can supply car parts at competitive prices will continue to hamper any step to launch a car industry in the country.

The low percentage of locally produced parts in Algerian car assembly plants is reflective of a lack of action on the upstream to attract foreign parts suppliers and encourage local enterprises to operate in the sector