The Moroccan connection

moroccan-1

Thomas Cullen analyses Renault’s ambitious plan to produce nearly half a million cars a year at a new manufacturing complex in the Moroccan port of Tangiers.

Renault has announced its intention to open a fully built-up assembly plant producing 400,000 cars a year in Tangiers, Morocco. If it achieves its ambition the plant will be one of Renault’s largest, producing Logans for Europe, the Middle East and beyond. It represents a huge opportunity for Morocco, a big change in production strategy for Renault and as ever, logistics is at the centre of this change.

Renault’s plant and supply chain in Tangiers have the potential to be a vanguard in the changing production geography of the sector. Admittedly there are questions over the viability of the project–already alliance-partner Nissan has pulled out, suggesting Renault (which was not available for interview for this article) may struggle to find markets for the large volumes it intends to produce there–but such hurdles do not change the fact that an assembly plant located within a port location in an emerging market is a development of remarkable importance.

The catalyst for Renault’s ambitions in Tangiers has been the creation of a new container shipping facility, one of a generation of large terminals that has driven a transformation in supply chains in other sectors. Logistics difficulties and other weaknesses in infrastructure would normally be a barrier to opening volume production in a country such as Morocco but the Tangiers-Med complex has largely overcome these.

Another factor in the plant and its strategy has been a free trade agreement between Morocco and the European Union, which has eliminated most customs duties for industrial goods exported to the EU while Morocco has been gradually lifting import restrictions over the past decade. The free trade agreement is scheduled to come into full force by March 2012. Morocco also has agreements in place with other markets in the region, including Egypt, Tunisia, Jordan and Turkey.

Tangiers-Med port

Located on the gateway between the Atlantic and the Mediterranean, Tangiers port has attempted to position itself as a ‘transhipment hub’ for the Northern Europe-China shipping route. Opened in 2008 Tangiers Med I, as it has been named, has two container terminals: one operated by APM Terminals and the Akwa Group; the second run by BLG Eurogate, MSC, CMA CGM and Comnav. Each has a capacity of 1.3m TEUs (twentyfoot equivalent units). By 2016, the Moroccan government aims to open a second terminal complex, known as Tangiers-Med II, which will double capacity to 2.6m TEUs.

Although part of a string of transhipment hubs that compete for traffic across the Mediterranean, Tangiers is also competing against Spanish and French ports in offering access to southwestern Europe by road. Tangiers has already put in place an infrastructure of logistics parks within the port, while next to the container terminal is a new ro-ro terminal that allows a direct trucking link to Algeciras, in Spain.

The wider port complex includes a ‘logistics free zone’ that will offer large scale warehousing, however it is unclear how far this facility has been developed. This is part of a wider free trade zone that is an attempt to attract manufacturing companies to the development. The progress of the logistics park–and to a lesser extent the free trade zone–appears to be at an early stage, with only a few LSPs in place but it is the Renault facility that will transform the location into an important industrial location.

Tangiers-Med industrial complex

The attractions of Tangiers for Renault are substantial; an efficient infrastructure, located on the doorstep of Europe yet with immediate access to world markets and complemented by a low-cost work force. The Renault Tanger Méditerranée plant, as it called in French, is scheduled to open in 2012 and will produce the Logan and its platform derivatives. Production volumes projected for the site are initially 170,000 per year, however Renault claims that in the long-term it will produce 400,000 cars by opening a second production line. If this comes true, Tangiers would become one of Renault’s most important plants.

Renault has had an interest in Moroccan production for several years, buying into the small Somaca plant outside Casablanca in 2003. However, the Tangiers plant represents a step-change from a simple interest in the local market, where Dacia and Renault have the highest share in a total light vehicle market of about 103,000 units in 2010, which was up about 9% in the first half of 2011. With an export focus, the supply chain is unlikely to be over-dependent on the Romanian ‘motherplant’ at Pitesti for Logan platform component production, not least as the plant will have a large on-site supplier presence.

With the exception of Russia, Renault has so far made little impression in expanding markets, so a vital part of its success will be the ability to tap into worldwide growth with the Logan. With the exception of Pitesti, most Logan plants are knockdown kits. Tangiers will offer a more efficient production to support sales in North Africa, the Middle East and South Asia.

Logistics at Renault Tanger

In keeping with a company that is still 20% owned by the French state, the factory has a strongly political flavour. The involvement of the Moroccan government is central, while the nationalised businesses of the French state are also strongly represented. Foremost among these ‘sweetheart’ deals are the different arms of the French railways, SNCF.

The contracts for inbound logistics appear to be earmarked for SNCF’s transport and logistics arm, Geodis, which has created, over the past few years, what it grandly calls a ‘logistics platform’ in the logistics park at Tangiers 1 (Geodis was not available for an interview for this article however it did review and approve the material concerning the company). In 2009, Geodis opened a 7,200-square-metre warehouse and consolidation centre that it plans to expand to 20,000 square metres in the indeterminate future. Geodis publically states that the move into Tangiers is part of a wider plan to serve freight traffic at the Tangiers Port. Certainly, there is some potential to support inbound and outbound goods brought to Tangiers by road from southern Europe. However, the principal impetus must be the Renault plant.

Although Renault is believed to be retaining the management structure it has at Pitesti, with a strong in-house control over logistics operations, Geodis has been appointed to the role of lead logistics provider (LLP) for the location, co-ordinating not only inbound traffic from tier ones but also aspects of in-plant logistics and the movement of material around the plant. The supplier park is substantial and therefore much of the inbound traffic will be straightforward to co-ordinate. However there is likely to be traffic between Tangiers and other Renault sites, notably Pitesti, in which Geodis will be heavily involved.

The other part of SNCF involved in the Tangiers complex is STVA, the vehicle logistics arm of SNCF. Operating within the context of Geodis as LLP, STVA has been selected to run the finished vehicle facilities in Tangiers. STVA wagons will move finished vehicles from the assembly plant to the ro-ro terminal 35km away, consolidate the loads at the terminal and prepare the cars for loading onto car carriers.

The supplier park in Tangiers is substantial. Component producers such as Visteon, Lear and Delphi have already announced their intention to invest, however at the time of writing, in late summer 2011, few have completed their facilities. The logistics options for these plants are limited. The proximity of the Tangiers ro-ro terminal gives the option to import materials from Europe by truck, suggesting that road freight will be the dominant mode for inbound material. This is a more attractive option thanks to the proximity of the suppliers’ existing facilities in Spain.

Less important is the ability to import components through the container port. Although services to Tangiers are frequent and are able to access Europe-Asia routes, deep-sea container services are notoriously unreliable. It is hard to imagine ‘justin- time/just-in-sequence’ operations relying on material moved by container ship, other than the cheapest materials whose inventory can be held in large quantities. A potential solution could be for short-sea container shipping, which tends to be more timely, however a further obstacle would be price. Container port charges are substantial and are likely to reinforce road-freight as the default modal choice.

In terms of shipping, the exception is ferry and short-sea ro-ro operations. Service regularity and reliability here is greater and much cheaper. Grimaldi Group already offers services into Tangiers from Italy and Spain, for example.

Finished vehicles are a different matter. For a plant projected to export 95% of its output, short-sea shipping is the obvious solution. However, the option of directly accessing deep-sea carcarrier traffic must be highly attractive. Despite the growth of European exports to China, for eastbound routes there remains considerable spare capacity, which gives Renault the option to cheaply access Middle-Eastern and south Asian markets.

The critical importance that logistics is set to play for the Tangiers plant is also highlighted by Renault’s management–in 2010 it appointed Michel Faivre-Duboz as general manager for Renault in Morocco. Faivre-Duboz had most recently been vice president responsible for global supply chain.

Incipient revolution?

What is revolutionary about the Tangiers plant is its strategic orientation to global markets. Car plants that focus on exports are unusual but hardly new. What Renault has done is tap into the global logistics infrastructure that has grown-up over the past decade or more. Whole areas of the world have been opened up by self-contained logistics facilities such as those at Tangiers-Med, enabling manufacturing operations to by-pass the infrastructure problems of emerging markets. They offer the ability to access cheaper labour, combined with the logistics efficiencies of western style ‘green-field’ sites. It is such locations that have driven globalisation and now the automotive sector is also developing the concept. Increasingly, such sites will not merely complement traditional production locations but will even rival them.