Morocco bids to build auto industry for the region

Shifting gears away from reliance on agriculture could kick start Moroccan economy

At a factory in Casablanca this month, executives and officials gathered at a launch ceremony for a new car model. It was a small but significant step, Moroccan officials hope, in the country's emergence as an auto producer for the region.

The factory is operated by Somaca, a venture which is majority owned by the Moroccan arm of French car maker Renault . Somaca produced 60,000 cars in 2012 under the Renault and Dacia brand names.

Now it is making a new version of the Sandero, a small, low-cost sedan from Dacia, the Romanian unit of Renault.

"All the process that you see comes from the Romanian plant. We have just copied it, and it works perfectly," Fabrice Delecroix, Somaca's managing director, told Reuters.

Somaca is part of an expanding web of car makers and parts suppliers in Morocco, a heavily agricultural country which hopes to use the auto sector to expand its industrial base.

A strong auto industry, exporting cars to Europe, North Africa and further afield, could help to resolve one of the country's main economic weaknesses, its external deficits. Morocco posted a trade deficit of $5.3 billion in the first three months of 2013, and last year obtained a $6.2 billion precautionary credit line from the International Monetary Fund in case of further pressure on its foreign reserves.

The auto industry may also become important to Morocco's political stability by reducing unemployment, which is officially estimated near 10 percent and is believed to be much higher for young people.

Currently, agriculture - some of it in the form of rudimentary and subsistence farming, and highly vulnerable to the vagaries of rainfall - employs about 40 percent of the workforce of over 11 million people.

"Morocco has a chance to become a big player in the auto industry," said Najib Akesbi, an economist at the Hassan II Institute of Agronomy and Veterinary Science in Rabat, though he added that the country would need to develop a better qualified workforce.

Morocco at present has only two factories making fully assembled cars: the Somaca facility and a plant opened by Renault near the northern port city of Tangier in February last year. The country's total car production last year was about 120,000 cars, with roughly 90,000 of them exported, mainly to Europe and Arab nations.

Renault's Tangier car factory, the biggest in North Africa, required initial investment of 600 million euros ($785 million) and is expected to reach an annual production capacity of 400,000 vehicles in coming years.

"The capacity of the Tangier plant will double in 2013 and 95 percent of its production is to be exported," the head of Renault's Moroccan operations, Jacques Prost, told Reuters.

Many of the benefits to the wider Moroccan economy come in the form of parts orders from Renault to local companies; Prost said some 42 percent of the content of Renault's Moroccan cars came from local suppliers.

Renault claims a 37 percent market share within Morocco, selling 47,700 new cars in 2012 including 24,042 under the Dacia brand. Peugeot and Ford also have major presences in the market.

Morocco has several advantages in attracting auto sector investment. Workers' salaries are about a quarter of the French minimum wage; the average monthly pre-tax wage in Morocco is around $550.

Meanwhile, car exports from Morocco benefit from several free trade agreements signed by the government, mainly with the European Union and with Jordan, Egypt and Tunisia.

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