Industry Trend Analysis - Autos Investment Round-Up: Active Suppliers Show Industry Development - JUNE 2017

BMI View: Supplier investments are a positive sign of the MENA region ' s nascent vehicle production industry developing. This is particularly true in Iran where an expected influx of Western brands will require a robust supplier network.

In BMI's regular round-up of production investments, we track the latest projects from the production side of the industry and analyse trends that we see developing on a regional basis. In doing so, we hope to build a picture of any potential hubs that may be developing, as well as company strategy in terms of production bases and export programmes.

MENA Autos Production Investment
Date Announced Country City/State/Region Company Value Brief Description Date Onstream
na = not available. Source: BMI
Dec-16 Egypt Suez Ghabbour Auto EGP1bn (USD53.8mn) New plant for production of motorcycles and auto-rickshaws with an annual production capacity of 120,000 units of each 2018
Jan-17 Algeria Meftah Renault Trucks n/a Joint venture between BSF Souakri industrial group and Renault Trucks to build a plant for Renault and Volvo trucks with an initial annual capacity of 2,000 units, rising to 5,000 by 2019 2018
Feb-17 Iran Zanjan Punch Powertrain IRR1.1trn (USD27.5mn) - first phase New continuously variable transmission plant in a joint venture with the Industrial Development and Renovation Organisation, with an annual production capacity of 160,000, creating 100 jobs transmissions n/a
Feb-17 Algeria Setif Unnamed USD250-300mn New plant for production of car, bus and truck tyres 2017
Mar-17 Morocco Tangier Sogefi EUR10mn (USD10.6mn) New plant for engine filtration systems, supplying clients domestically and in Europe, creating 120 jobs 2018
Mar-17 Iran Kerman Hyundai n/a Addition of the Elantra model to existing production agreement with Kerman Motors for i10 and i20 models, with Accent to be added in September 2017 2017
Mar-17 Iran Tehran Riseco-Mecaplast Key Plastics n/a New joint venture for production of car parts to supply Peugeot and Renault, with a view to exporting 30% of output 2017

The latest round-up of autos investment in the Middle East and North Africa (MENA) region looks relatively small with a combined value of less than USD400mn for those projects that have released figures. However, the region is still developing in terms of vehicle manufacturing and the nature of some of the projects shows an important trend of developing the local supply chain which will be crucial to increasing localisation.

Suppliers Are Busy

The majority of investment projects in this latest round-up come from component suppliers, which is a positive sign for a nascent production industry, as much of the region is. Also notable is that Iran is the focus for at least two component supplier investment projects. One of the concerns about the rush to invest in production in Iran is that the domestic supplier network is not yet developed enough to support the potential increase in production - particularly for the expected influx of Western brands.

In general an increase in supplier investment is positive for the development of a production industry and we expect to see this being an area of growth in the MENA region as more investment comes in from the vehicle manufacturers themselves. Algeria is a good example of this with investments in this round-up on both the vehicle and parts sides as the arrival of major brands such as Renault has attracted suppliers to the country.

Finding Opportunities In Egypt

Investments in Egypt have been scarce in recent years as a deteriorating economy and failure to implement an industry policy have kept investors away. This is reflected in our MENA Autos Production Risk/Reward Index, where Egypt ranks bottom among vehicle manufacturing markets in the region, mostly due to its low score for 'Risk', which denotes high levels of risk to operating in the country ( see 'MENA Autos Production: Risk/Reward Balance Puts Morocco On Top ' , April 11).

Nevertheless, for companies based in Egypt, it is necessary to find areas of opportunity and national carmaker Ghabbour Auto has invested in production for the motorcycle and auto rickshaw segment, which is also a big export business for the company. The motorcycle division's sales in Iraq more than doubled in FY16, for example. There are still considerable challenges to the Egyptian market, however, and we do not expect this to be the beginning of a resurgence in investment in the country, particularly with the implementation of an industry strategy further delayed.