Download moroccan automotive industry

MOROCCAN AUTOMOTIVE
INDUSTRY
FACT PACK
BUSINESS SWEDEN, SEPTEMBER 2016
 With its strategic geographical location and competitive labour market Morocco’s
vehicle production capacity has grown to become the largest in the region. Even
though the Moroccan economy is set to slow down in 2016, the vehicle sales is still
expected to increase with 8 %, making Morocco the fastest growing domestic
market for vehicles across North Africa,. The slowdown of the economy could
potentially hamper the growth of the demand, but higher wages and lower interest
rates can be enough to keep the growth up in the short-term, as can the low
percentage of the population owning a passenger car in the long-term.
MALAK SEKKAT
Associate
+212 522 36 25 10, +212 522 97 95 80
[email protected]
MOROCCAN
AUTOMOTIVE
INDUSTRY
“We are in a perfect location at the gates of Europe,”
- Jean-François Gal, director of Renault factory in northern Morocco
OVERVIEW
The base for Morocco’s development towards a
modern society, with increased openness,
democracy and a more modern state of law,
began in 2011 when a new constitution was
adopted. This has had effect, and in 2014
Morocco became the third-largest recipient of
foreign investment in Africa. The country has
maintained
a
stable
macro-economic
environment has had an average of 4.4% of
GDP growth over the past 15 years.
The government has, since the new constitution
was adopted, continued to show their strong will
to make Morocco attractive for foreign investors.
In the 2016 Budget Law initiatives efforts were
made to solidify the tax base, rein in
expenditures and implement a pension reform in
order to strengthen the economical sustainability.
This in combination with availability of skilled
workers at low wage rates and a developed
infrastructure has contributed to creating a
macroeconomic framework more sustainable
than most in the region. The Moroccan economy
is however not yet diversified enough and as a
consequence of their dependency on rain-fed
agriculture Morocco experienced a sharp
deceleration, with a GDP growth expected to be
below 2%, during 2016, due to severe drought.
Although the economy in general is slowing
down the growth of the vehicle sector is
continuing with retained strength. The number of
produced units is forecasted to reach 0.31 million
in 2016, which would mean an annual growth of
16 %. If the market is to meet the expectation,
Morocco will be the best performing vehicle
market in North Africa in 2016.
FACT PACK | BUSINESS SWEDEN | 3
MACRO-ECONOMIC ASPECTS
DIMENSIONS
PERFORMANCE
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Fiscal Budget
Fiscal Budget
InflationInflation
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Exchange
Rate
Exchange
Rates
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Debt
Debt
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Taxes
Trade Balance
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FDI
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EXPLANATION
High fiscal deficit, although since 2013 efforts have been made
to decrease it
As a result of restraint in investment expenditures and
improvement of tax collection the fiscal deficit decreased from
7.2 % of GDP in 2012 to 4.3 % of GDP in 2015.
Goal to decrease the deficit below 3% by 2017
Has been quite stable around 2 % in the last 6 years
1.45% on average between 2008 to 2015
As a step towards greater flexibility the central bank reduced the
euro’s weighting in the currency basket in April, to 60 percent
from 80 percent, while raising the US dollar’s weighting to 40
percent from 20 percent
According to the Central Bank Morocco is aiming to introduce a
flexible exchange rate system in the early part of 2017
The external debt stock (% of GNI) has decreased steadily from
1985 up until 2008 when the trend turned. The external debt
stock was 41.1% in 2014.
Crisis in Euro zone, Arab spring and adverse weather has forced
Morocco to borrow to cover its deficit
Tax revenues has increased from 23.6% of GDP in 2000 to
28.5% of GDP in 2014
Main taxes are income (maximum rate 38%), corporate (30%)
and VAT (20%)
The trade balance was -12.3% of GDP in 2014
The current account deficit narrowed to - 6 % in 2014
Should continue to decline in the medium term as a
consequence of amplified domestic production and lower energy
imports. The current account deficit was partly financed by the
resilient capital account surplus, including substantial FDI flows
In 2014, Morocco became the third-largest recipient of foreign
investment in Africa
In 2015, Morocco attracted 3.6 billion EUR in FDI
MARKET INITATIVES
The main auto manufacturer in Morocco, Renault, is starting to get more competition as other vehicle
brands are starting to look to take advantage of Morocco’s strategic geographical position and
competitive labour situation. For instance, in 2015, PSA Peugeot Citroën announced that they would
move into Morocco with an investment of 560 million EUR for the construction of a factory to produce
small and subcompact cars for Africa and the Middle East. The initial production will be 90,000 units
per year, a figure that could increase to 200,000 as demand rises. Renault on the other hand has
been manufacturing cars in Morocco since 1966 and today employs nearly 10 000 workers. Renault
currently has two factories, located in Casablanca and Tangiers, which were estimated to produce
288,053 vehicles in 2015, making a 26.0% y-o-y increase. In April 2016, Renault reinforced its strong
commitment to auto production in Morocco by striking a deal of 918 million EUR worth with the
government and local spare parts businesses in order to increase their spare parts localisation. In
order to strengthen its supply chain within Morocco Renault is aiming to surge the local spare parts
sourcing from current 32% to 65% by 2023.
Morocco is increasingly positioning itself as a gateway to the fast growing African continent as well as
to the Arabic market, particularly among investors from the US and Europe. Renaults and Citroën’s
commitment in Morocco is likely to contribute to this, paving the way for other car companies that are
looking to increase their emerging market exposure. Morocco is operating like a highway to the
emerging markets of French speaking Africa and the Arab world, the success of the automotive
industry is also likely to attract foreign investors in other sectors, in particular aeronautics and
renewable energy. The increased vehicle production planned by both Renault and Citroën will also
boost the supplier segment. For instance, PSA Peugeot Citroën is aiming for 60% locally sourced
components to start with. A figure hoped to rise to 80% as the supplier base grows with the vehicle
production segment. Although Renault's presence and investment has contributed to the
establishment of over 30 auto component suppliers to Morocco, building a sustainable value chain
with in the country is difficult to achieve. Renault has for instance announced that they would consider
investing in an engine plant in the country, but before they could move forward a stronger supply chain
need to be present in Morocco.
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DEFINING THE BUSINESS OPPORTUNITY
The economic growth is expected to rebound in 2017, reaching above 3 %, making way for mediumterm prospects. Moreover, foreign investments are expected to continue to increase and as the
construction sector is taking off demand for heavy commercial vehicles and related construction
equipment is anticipated to increase. Passenger cars have been the out-performer with a growth of
sales of 22 % in the first quarter of 2016, despite the fact that the slow moving tourism should have
had an impact on the car rental and collective transport vehicles sales. Though passenger cars have
continued to retain a strong growth, sales of light commercial vehicles has decreased with 21% during
the same period.
Private consumption vehicle demand is expected to grow by 3.5 % in 2016, driven by the decrease in
car financing rates, with nearly all local dealers reportedly offering rates as low as 0.0%. Other
important growth factors are the higher availability of cheaper models from domestic production,
elimination of import taxes on European models, the return of KIA to the Moroccan market in 2015 and
economic prosperity in general. Over the period 2016-2020 the passenger vehicle sales is forecasted
by BMI to grow by 46.5% whereas the light commercial vehicles will show a modest growth,
forecasted to 1.9%.
As the growth of the vehicle production among the 30 largest vehicle producers, including Morocco, is
expected to 5 % until 2020, Morocco is predicted to experience a production growth of nearly 18 %.
Morocco is increasingly used by car manufacturers as it offers a strategic location for export to both
Europe and emerging markets in Africa and the Arab world. The share of the autos industry in total
Moroccan exports to increase from 1.5 % in 2010 to 12 % in 2015, and is prospected to continue to
grow.
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