New Plant Meant to Rebuild VW’s Presence in Algeria

MADRID – Volkswagen Group signs an agreement with SOVAC, its importer and distributor in Algeria, to create a joint venture that will build an assembly plant with daily capacity of more than 100 vehicles.

The deal is meant to circumvent import quotas established in 2013 by the north African government to help remedy its trade balance. Those quotas have shrunk the number of imported vehicles from 560,000 units in 2012 to 83,000 forecast for the current year.

VW will hold a minority stake in SOVAC, the automaker’s sales partner for Volkswagen, Volkswagen Commercial Vehicles, Audi, SEAT, Skoda and Porsche brands since 2001. The distribution network has more than 100 facilities and 1,650 employees across Algeria. In 2015, the automaker delivered 30,000 new vehicles to customers through SOVAC.

SEAT will be the VW subsidiary most affected by the deal, as its popular Ibiza minicar will be assembled in the new Algerian plant starting in spring 2017. Other models, including the VW Golf, Skoda Octavia and VW Caddy commercial vehicles, also could be built in the new plant.

Union sources at SEAT’s plant in Martorell, Spain, say VW should benefit financially from the agreement but will reduce activity at the Spanish plant, although only final assembly of the Ibiza will be done in Algeria.

Lower-volume, costlier SEAT models such as the Leon will continue to be exported to Algeria fully assembled and subject to the import quotas.

The union sources hope the new African plant will help re-establish SEAT in the Algerian car market, where the brand in recent years has fallen from sixth to 10^th place in sales.

The new plant is being built on a 61-acre (150-ha) site in the Relizane region, 135 miles (220 km) west of Algiers.

Meanwhile, the restructuring plan announced last month by VW includes reducing 23,000 members of the core brand’s work force through buyouts, early retirements and reductions in part-time staff, but apparently does not affect employees at the automaker’s Spanish plant near Pamplona in Landaben.

The Landaben plant is the exclusive global source of the VW Polo, and a new generation of the  B-car now in development will be built there. Landaben also will assemble a new CUV based on the Polo and slated for a 2018 market launch.