French-Algerian spat to speed up closure of Renault plant in Oran

Facing hurdles since 2020, the Renault factory on which the Algerian regime pinned high hopes braces for a total shutdown, marking an utter fiasco of the automotive industry in the Maghreb country, at a context of tense ties between Paris and Algiers.

In 2012, Algerian authorities under then President Bouteflika convinced Renault to set up an assembly plant near Oran, hoping to emulate Morocco’s success and diversify its gas and oil-dependent economy.

However, the plant that was supposed to assemble 25.000 cars annually, fell short with only some 2400 cars made in 2023. The reasons are self-inflicted as Algeria implements a drastic import restriction policy, conditioning to the auto-maker to source 30% of its parts from Algerian suppliers.

This condition left Renault Oran in tatters unable to fit its business model and quality requirements in the absence of credible local suppliers.

With the unfolding of one of the worst political crises between France and Algeria, the latter has tried to implement some economic retaliation measures, such as reducing French imports. This has thwarted French investors including Renault, which sees no lucrative future for its Oran plant.

Renault would thus follow the example of Hyundai and kia which closed their plants due to supply disruptions.

The government under current President Tebboune has pushed these plants to close, accusing them of practicing “disguised imports” with a very low local sourcing rate.

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