Algeria Hub of Renault’s Three-Continent Growth Plan

TIZI OUZOU, Algeria – The expansion of Renault’s manufacturing operations in Algeria looks set to continue, providing new jobs in the North African nation and fueling speculation about its strategic significance.

The November opening of an assembly plant in the coastal city of Oran already has created 250 direct jobs and 500 indirect jobs, according to Guillaume Josselin, CEO of Renault Algeria. The automaker is increasing staff by 100 employees this month, he says.

The plant is a joint venture 51% owned by the Algerian government (34% by the National Society for Industrial Vehicles and 17% by the National Investment Fund) and 49% by Renault.

The automaker also plans to open a spare-parts production unit in Constantine, 242 miles (390 km) east of the capital city of Algiers. Feasibility studies and inquiries to select a site for the plant are under way.

Although the Renault brand is considered expensive by the average Algerian motorist, the company boasts impressive results in the former French colony.

“Renault is the leading brand and we have placed (low-cost brand) Dacia in third place on the podium (for market share),” Josselin says. “These results were obtained thanks to the quality of our products, the professionalism of our network and the quality of service we deliver to our customers.”

Car imports to Algeria decreased in 2014 to $6.34 billion, down from $7.33 billion in 2013, according to Algeria’s National Informatics Center and Customs Statistics. With the reintroduction this year of state-sponsored car loans, which were suspended in 2009 in a move to curb imports, the purchase of vehicles produced locally will be prioritized.

A new law enacted in January requires dealers to create a sales relationship with Algeria-based automakers, not just importers; comply with standards on setting prices and levying relevant taxes; deliver ordered vehicles on time; and have necessary spare parts in stock.

The law may need time to have an impact; dealers say the impact of Renault production in Algeria currently is small.

“The Renault plant in our country produces an insignificant amount compared to the growing demand,” Rachid Guttab Hunday, a dealer in Tizi Ouzou, tells WardsAuto.com. “We import about 75,000 cars each year and demand is growing steadily. Brands like Hyundai are needed. Renault has come at a time when Asian brands are already well established in this country.”

Yet, not only potential local demand is driving the Renault investment.

Global auto-industry analysts see the Renault investment as a twofold strategy aimed at consolidating markets in Europe as well as positioning the French company for potentially significant growth in Africa. Ownership of about 130 vehicles per 1,000 inhabitants in Africa is barely a quarter of the figure for Europe.

“It's an interesting development,” says Professor Peter Cooke, KPMG emeritus professor of automotive management at the University of Buckingham in the U.K. “My suspicion is this will be a lower-cost facility for sourcing into mainland Europe in line with (Renault’s) strategy of sourcing from lower-cost countries, as well as supporting North African markets.

“Algeria is relatively close to France in terms of supply chain. I think one has to see this announcement in relation to the Dacia operations in Eastern Europe as Renault reinvents itself as a low-cost supplier,” Cooke says, noting how the automaker has leveraged its 1999 takeover of the Romanian automaker to spearhead its penetration into Central and Eastern European and North African markets.

Renault says the Symbol automobile being built in Algeria is based on the low-cost Dacia Logan and initially is being assembled from semi-knocked-down kits shipped from Romania. The automaker says Algerian sourcing has begun, with plastic injection parts and seats being provided by local suppliers and paint and bodywork facilities to follow soon.

To adapt to rugged Algerian roads, Renault has said it will raise the suspensions of vehicles built at the plant by 0.8 in. (20 mm) over its standard model designs.

Algeria is Africa’s second-largest automobile market and Renault is the leading brand with a 26.9% share of the market in 2014, according to the company’s annual report. But the automaker clearly has set its sights on expanding into other African and Middle Eastern countries.

“The interesting challenge will be how they respond to the development of ISIS further along the coast,” Cooke says of the Islamist extremist group that is mounting sustained attacks in Libya, which shares a border with Algeria.

– with Alan Osborn in London