Industry Trend Analysis - Autos Investment Round-Up: GCC States Expand Capabilities - SEPT 2017


BMI View: The GCC will continue to see more production investment as governments in the region look to diversify into manufacturing. North Africa continues to see the most investment activity, however, as Morocco ' s supply chain looks to keep pace with vehicle production.

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
Apr-17 Oman Duqm Wuhan Xiao Long Auto-Tech USD84mn New plant based at the China-Oman Industrial Park for the production of SUVs for civilian and military use, with an initial annual production capacity of 10,000 units, mostly for export to the Gulf states and Africa n/a
May-17 Iran Kermanshah IKCO IRR570bn (USD15.7mn) New production line for Peugeot Pars models with an annual production capacity of 15,000 units, creating 200 jobs 2017
May-17 Saudi Arabia Jubail Industrial City Ssangyong n/a New plant in co-operation with the Saudi National Automobile Manufacturing Company to being local assembly of the Q200 pick-up from CKD kits, moving eventually to CBU production 2020
Jun-17 Morocco Tangier JTEKT EUR15mn (USD17.1mn) New plant for the production of components and assembly of power systems to supply Renault and PSA plants in the same Automotive City Free Zone with an initial capacity of 230,000 units 2018
Jul-17 Morocco Sale Faurecia MAD170mn (USD15.4mn) New plant for production of seat covers for Peugeot with a daily capacity of 10,000 units, to be followed by another new plant for interior and clean energy products in 2018 2017/2018
Jul-17 Egypt n/a FAW n/a New assembly plant in partnership with locally-based Geyushi Motors to assemble FAW-branded commercial vehicles n/a

The value of investment in the Middle East and North Africa (MENA) region in this latest round-up is quite small compared with other regions, at just USD132.2mn for those projects with a value reported. However, the projects carry significance, such as the growth of manufacturing in the markets of the Gulf Co-operation Council (GCC) and the return of investment in Egypt.

Growth Of GCC Manufacturing

One trend we have highlighted before, which returns in this update, is the growing role of Oman in vehicle manufacturing ( see ' Autos Investment Round-Up: Morocco Emerges As A Regional Favourite ' , July 12 2016). The latest project sees Chinese company Wuhan Xiao Long Auto-Tech investing in a plant for SUV production at the China-Oman Industrial Park, as part of a bigger announcement that 10 Chinese companies had signed land lease agreements at the park. As most of the 10,000 units a year are destined for export to other GCC states and African markets, this suggest that the choice of manufacturing location has more to do with the bigger Chinese investment strategy than targeting the local market. However, the production of parts at the plant and plans to add an electro-mechanical systems facility in a second phase to support production will create potential for more SUV production in Oman.

Elsewhere in the GCC, South Korea's Ssangyong is targeting Saudi Arabia, first through imports, but also announcing plans to assemble in the country with local partner, the Saudi National Automobile Manufacturing Company. The plant will produce the Q200 pick-up truck, starting with assembly of semi-knocked down kits but eventually moving to full production. This revives a long held view that Saudi Arabia would be the leading GCC state to move into vehicle production ( see ' Domestic Car Could Provide Beginnings Of Gulf Production Base ' , June 21 2010). This was dealt a blow when Jaguar Land Rover cancelled its plans for a plant in the country, but Ssangyong's plans show the potential is still there.

Egypt Returning To Favour

This is the second consecutive update to feature a project in Egypt, which has seen a pause in investment as the market has been in freefall for the last few years. China's FAW will join with its local distributor Geyushi Motors for local assembly of commercial vehicles. Output will mostly be for export to the Middle East and other African markets, which aligns with the current weakness in the domestic market. It does suggest that companies still see Egypt as having a competitive edge as an export hub for the MENA region, despite the rise of Morocco, and to some extent Algeria, as regional production hubs since Egypt's economic and security backdrop began worsening ( see ' Autos Investment Round-Up: GCC Base Expands, Egypt At Risk ' , June 4 2015).

That said, two projects for Morocco in this round-up are evidence that the hub there will continue to expand. Indeed, both new plants, for JTEKT and Faurecia, will be supplying Peugeot's local plant, showing how continued investment from carmakers results in the creation of a local supply chain, which is an area the government is particularly focussed on in order to cultivate the manufacturing sector.