Morocco leads North Africa as a vehicle manufacturing base for exports to Europe, based on the sort of long-term commitments and investment that its neighbours need to embrace if they are to compete.
In 2023, Morocco officially became the largest automotive exporter to the European Union, overtaking automotive juggernauts like China and Japan. With a robust growth trajectory in finished vehicle production, the country’s trade with Europe is set to further expand in the coming years. It is yet to be seen whether other countries of North Africa will follow suit.
Morocco’s automotive exports to the EU in 2023 saw a substantial increase, reaching a value of €15.1 billion ($16.4 billion). This marked a significant growth of nearly 30% compared to the previous year, as estimated by Morocco’s Foreign Exchange Office (FCO), the country’s foreign trade authority.
Morocco is still number two in terms of finished vehicle exports to Europe, delivering 536,000 in 2023, compared to 782,000 by China.
However, recent growth has largely been driven by automotive components. Earlier estimations by the FCO put the value of the wiring industry’s exports last year at 46.1 billion dirham ($4.7 billion), nearly a third above the 2022 level.
In addition, the powertrain industry enjoyed a 25% hike in exports to MAD 11.3 billion ($1.1 billion).
Official data revealed that Spain led the list of Morocco’s largest sales markets, followed by France, Turkey, Germany and Italy. The projections for 2024 suggest that Morocco is on track to surpass South Africa and become the largest African finished vehicle manufacturer.
Morocco is not the only net automotive exporter in North Africa. Around 80% of the Tunisian automotive industry is exported to European countries, including France, Italy and Romania, as estimated by the Tunisian Automotive Association.
“Both Tunisia and Morocco started out as low-cost alternatives to East European countries for labour-intensive components, such as wiring harness and cables, but Morocco realised the potential in the automotive industry and created such an environment which is favourable for both OEMs and component manufacturers,” comments Dr Pal Negyesi, director of CE Auto, a think tank.
However, there is visible competition for investments between the countries of North Africa, too. In February 2024, Mitsubishi Corporation announced plans to liquidate their Tunisian business and consolidate operations under their Casablanca office.
Focus on Europe
The Moroccan automotive industry’s success story is largely related to its emergence as a fully fledged assembly hall for the EU.
Out of the 700,000 finished vehicles produced domestically, nearly 80% are exported primarily to the EU. Domestic sales remain close to 150,000 per year and are unlikely to change substantially in the coming years. Under the government plan, Morocco is expected to push its finished vehicle production to 1m units in 2025. Apparently, the additional volumes are destined for foreign customers.
Just 14km from Spain, Morocco provides a natural gateway to the European market. With modern ports and constantly improving infrastructure, the country can facilitate quick and efficient access to major European markets with reasonable delivery time and logistics costs.
So far, all exports from Morocco are going in a single direction. A spokesperson for Wallenius Wilhelmsen says that automotive exports from North Africa to Europe are typically handled by short-sea vessels, leaving few development opportunities for vessels in the region.
“We have had limited sailings to and from Casablanca, with just a handful of port calls in total during the last two years,” explains the spokesperson.
Andreea Maria Serbu, senior manager of external affairs with the Association of European Vehicle Logistics (ECG), comments that flows from Morocco to Europe have already been established for many years, with Stellantis and Renault producing a significant volume of cars for the European market.
Virtually all finished vehicle exports to Europe are flowing through Tanger Med, official data shows.
Tanger Med terminals
The two vehicle terminals in the port complex handled almost 578,500 vehicles in 2023, reflecting a 21% increase from 2022, according to the Tanger Med Port Authority. This traffic primarily included 341,758 vehicles for export, produced by Renault factories in Melloussa (Tangier) and Somaca (Casablanca), along with 176,208 vehicles exported by the Stellantis plant in Kenitra.
The finished vehicle carrier terminal of Tanger Med is subdivided into two terminals: the Renault Vehicle Terminal and the Multi-User Vehicle Terminal.
Remarkably, Tanger Med is already braced for the upcoming growth in trade flows, having a pass-through capacity of around 1m new vehicles per year.
“On a fundamental level, Morocco’s geographic proximity to Europe naturally facilitates trade,” comments Taieb Douhlal, operational director of the Austics Group, a Morocco-based automotive logistics provider. “However, more strategic elements are at play, such as the country’s political stability and favourable incentives for multinational companies to establish operations in Morocco. Additionally, the availability of affordable labour has been a key driver in attracting foreign investment and developing the country into an automotive hub,” he says.
Douhlal described the present situation in the automotive logistics sector as “tense and demanding”.
“We have positioned ourselves as experts in managing the pressure of meeting tight deadlines and ensuring the safe and efficient delivery of vehicles through complex routes,” Douhlal stated.
Russia and Egypt
Egypt, Algeria and Tunisia are also taking steps to develop their automotive industries, hoping to follow the Moroccan example. For instance, Egypt is on track to resume and even expand the contract assembly of Lada vehicles in 2025.
The leading Russian automaker Avtovaz assembled Lada models in Egypt for over two decades until Western sanctions stopped this business in 2022. In total, Avtovaz delivered 95,000 automotive kits to Egypt.
In early 2025, production of Lada cars will begin in Tarbul, Egypt, Ahmed Samir, Egyptian Minister of Trade and Industry told Russian state news outlet RIA Novosti.
“The new plant is expected to be one of the largest in Egypt for finished vehicle assembly, with a production capacity of 50,000 to 70,000 per year,” Samir says.
“As for whether other North African countries could follow Morocco’s lead, the answer is certainly yes,” - Taieb Douhlal, Austics Group
Lada finished vehicles are due to be assembled at the Al Amal plant by the Egyptian company GV Investments, which signed a partnership agreement with Avtovaz.
Speaking at a session of the Russia- Africa forum on July 27, Maxim Sokolov, Avtovaz CEO, admitted that Al Amal could become a transport and logistics hub for the supply of Lada cars for the entire African continent. He also revealed that a similar project for assembling Ladas could be considered with other North African countries, primarily Algeria.
A source on the Russian automotive industry who wished not to be named, however, expressed strong doubts over the potential of Russian investments to turn Egypt into a prominent automotive hub in Northern Africa.
“The declared figure [of 50,000 to 70,000 finished vehicles] is a nameplate capacity – it will not necessarily be reached in 2025, 2026 or ever. Let’s not forget that Avtovaz still experiences certain difficulties in sourcing components, even on the home ground. Logistics issues and [difficulties in] collecting payments for delivered goods still plague Russian export opportunities,” the source says.
Vladimir Bespalov, an independent Russian automotive expert, also believes that the initial batches of automotive kits delivered to Egypt under the contract are to be small, limited to a few hundred units.
The source added that political willpower could help other North African countries to ramp up finished vehicle production, but prospects in this field are primarily associated with China or Europe, not Russia.
Challenges in Algeria
In 2023, Algeria kicked off a large Fiat finished vehicle assembly plant in Oran, western Algeria, with an initial annual production capacity of 50,000 units. The plant was built in a record time of just one year, based on an agreement between the group and the Algerian Ministry of Industry with an estimated investment value of €200m ($217m).
However, Algeria has a long history of projects with controversial results. The first efforts to develop automotive industry in the country were taken in 2012 by Renault, followed by Hyundai and Volkswagen in the next years.
In the end, Algerian government officials complained that some of those projects were running exclusively on imported parts and generated little value for the local economy. Furthermore, the authorities also detected major financial irregularities, and officials were tried in corruption cases related to these factories, which led to the closure of most of them and the cessation of partnerships with foreign OEMs. Remarkably, Algerian President
Abdelmadjid Tebboune estimates that his country has lost $3.5 billion in failed finished assembly projects. Tebboune explained that these projects were originally designed to compete with the Moroccan automotive industry but did not achieve the desired results.
“As for whether other North African countries could follow Morocco’s lead, the answer is certainly yes,” Douhlal says, though he warns the quest will likely be challenging.
“The path they must take is like that of Morocco – a process that requires long-term commitment and investment,” he adds. “It’s not an overnight change but rather a multi-decade journey of building industrial capabilities, improving labour skills, and ensuring political and economic stability to attract and sustain foreign investments in key sectors like automotive.”
For instance, Morocco has established an extensive network of Free Trade Agreements (FTAs) that provide access to over 50 countries and 1.3 billion consumers. These agreements include FTAs with major economic partners such as the EU, USA, Turkey and the UK. No other country in the region has succeeded so much in removing trade barriers.
Battery production prospects
Douhlal also warns that the entire global automotive logistics sector navigates choppy waters, and how these factors could affect North Africa and the Moroccan automotive industry is yet to be seen.
“So far, Morocco has successfully leveraged recent geopolitical shifts,” - Taieb Douhlal, Austics Group
“For instance, changes in environmental policies from major powers like the EU or the US can lead to adjustments in supply chains to comply with new CO2 emission standards,” says Douhlal.
Developing batteries for electric vehicles has become a priority for Morocco, which is braced for the ban on conventional finished vehicles in Europe from 2035, Khawla Ajefri, a local analyst, reports.
In November 2021, the Moroccan government proposed reducing import duties on lithium-ion cells from 40% to 17.5% to boost local production of batteries using cells imported from East Asia. The move is key to Morocco’s rise to the green mobility giants’ club. Morocco is looking to expand its automotive ecosystem to include local manufacturing of lithium-ion batteries, Ajefri says.
In general, Morocco made a big bet on EVs and, so far, remains confident it was the right move, though EV sales in Europe in recent years showed mixed dynamics, according to Ajefri.
However, Morocco has failed to attract Chinese EV manufacturers who are eyeing the promising European market. “Morocco is now getting battery plants but I don’t think Chinese OEMs will use Morocco as a gateway to Europe,” says CE Auto’s Negyesi. “Based on recent news, Chery is close to setting up a plant in Turkey [and] BYD will establish a huge factory in Hungary,” he adds.
Geopolitical ground
Several other factors could potentially hurt the Moroccan automotive industry, according to sources.
“Conflicts in certain parts of the world can disrupt trade flows, alter supply routes and create uncertainty in the markets for essential raw materials like copper or lithium, which are critical to the automotive industry,” says Douhlal. “So far, Morocco has successfully leveraged recent geopolitical shifts, particularly by strengthening its trade partnerships with Europe and establishing itself as a key player in global supply chains. However, it’s important to note that these advantages may not be permanent.”
Negyesi warns that despite the Moroccan government’s plans to ramp up the localisation ratio from declared 60% to 80% in the coming years, the supply chain still faces certain challenges.
“Local suppliers are still not strong enough, so many of the parts required for assembly are imported, which can cause a bottleneck,” says Negyesi.
Besides, North Africa is a region known for political instability, and relations between Brussels and Rabat have not always been cloudless.
“Over 25,000 refugees left Morocco in 2023 and more in Tunisia. An increasingly wary Europe may alter its course in relations to these countries,” says Negyesi.
However, Morocco has intensified its gatekeeper role in EU migration, stopping 87,000 migrants in 2023, official data indicated. In addition, Brussels and Rabat are reportedly close to striking a new migration deal, which would allow the kingdom to score a few political points.
“Geopolitical changes are often unpredictable, and new tensions or shifts in trade alliances could eventually present significant challenges for the Moroccan industry or reduce its competitive edge on the global stage,” warns Douhlal.
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