Industry Trend Analysis - Autos Investment Round-Up: North Africa Grows In Strength - DEC 2017

BMI View: A combination of continued interest in Morocco and the return of investment to Egypt makes North Africa the real growth spot for production in the MENA region. Meanwhile, Iran is seeing its longer term investors developing export operations to create new opportunities for the market.

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
Source: BMI
Jul-17 Egypt Cairo Toyota USD8.5mn Assembly line for parts to increase local content of the Fortuner SUV 2017
Aug-17 Iran Saveh Renault EUR660mn (USD780mn) Joint venture to take over a refurbished plant to increase annual output capacity in the country by 150,000 units in the first phase, adding two new models to locally produced range 2018
Sep-17 Morocco Tangier Magneti Marelli EUR37mn (USD43.7mn) New plant for production of components, starting with shock absorbers in the first phase, with an annual production capacity of 6mn units 2019
Sep-17 Morocco Rabat Ficosa EUR50mn (USD59.0mn) New plant for production of in-vehicle cameras, creating 800 jobs. Investment includes another plant in Malaysia 2022

Although the number of projects in this latest round-up is smaller than previously the value is much larger at USD891.2mn. This is mostly down to the EUR660mn (USD780mn) investment from Renault to increase its footprint in Iran. However, the rest of the projects show that North Africa is the growth area for production investment.

Renault Steps Up First Mover Advantage In Iran

In line with our view that the companies with previous experience of business in Iran would be the quickest movers and biggest beneficiaries after sanctions were eased, Renault is moving to significantly ramp up its capacity in the country. The EUR660mn (USD780mn) will be invested in a 60% stake in a joint venture with the Iranian government and local company Parto Negin Naseh . The refurbished factory will produce the Duster and Symbol models in the initial phase with an annual capacity of 150,000 units, rising to 300,000 by 2022, with around 30% of output allocated to export markets.

This in itself is noteworthy as most investments in Iran so far have been aimed at tapping the domestic market's potential. This project opens up new opportunities for the market, however, as an export base. It will also make Renault one of the biggest producers in the country with a total output of around 500,000 units when the new facility is at full capacity.

North African Hub Grows

The trend for North Africa to grow its vehicle production industry continues, with a notable feature being the presence of Egypt in back to back round-ups after a prolonged absence due to the country's economic weakness spilling over into the industry. Toyota Motor has invested USD8.5mn in production of parts to increase the local content in the Fortuner SUV it is building in the country. However, this is just the beginning as the company has pledged to step up its investment in Egypt over the next five years. Following Chinese company FAW's investment in the country in the last round-up ( see ' Autos Investment Round-Up: GCC States Expand Capabilities ' , July 20), this shows a cautious return of carmakers to what was previously North Africa's biggest production market.

However, the remaining projects show that Morocco continues to gain momentum as the region's new production hub. The two supplier investments, by Magneti Marelli and Ficosa, align with our view that Morocco will require a solid local supply chain if it is to meet the government's vehicle production target of 1mn units over the next 10 years. Furthermore, we believe the likely acquisition of Magneti Marelli by Samsung this year will support the Moroccan government's aim to promote electric vehicles (EVs) within the next 10 years as part of its ambitious goals for the automotive industry. Magneti Marelli has noted that the suspension components are only the first phase of its production and that there is the possibility to expand its product range. We believe that the EV expertise that Samsung will bring could further expand Magneti Marelli's production footprint to include EV components as the Moroccan and global demand for EV components expand.