Algeria Autos Report Q2 2012

Figures released by the Association des Concessionaires Automobiles d’Algerie (ACAA) in January 2012 show that 280,803 new cars were sold in Algeria in 2011 (excluding sales figures from the local BMW, Great Wall Motors, Iveco and Mercedes-Benz dealerships). This represents an increase of 26.4% year on year (y-o-y) on the 222,123 cars sold in 2010 and reverses the negative trend in sales seen over 2009- 10. The strong annual sales figure also bodes well for the future development of the indigenous auto industry over our newly extended forecast period to 2016.

Looking at individual marques, Renault remains the dominant player in the Algerian market, selling 55,800 units over 2011 under the Renault badge and a further 19,242 Dacia units. Taken together, this means that Renault just surpassed its sales target of 75,000 units for the full year. Renault had a market share of 26.7% across its Renault and Dacia brands, down on the 28.5% market share it held during 2010.

Behind Renault is Hyundai Motor, which has experienced a very strong 2011. Hyundai vehicle sales stand at 52,185 units for 2011, for a market share of 18.6%, up strongly on the 14.3% share it held during 2010. In third place is Peugeot, on 28,199 units (10%). The top five is rounded out by Chevrolet (24,716 units, 8.7%) and Toyota Motor (22,742 units, 8.1%). This report includes SWOT analyses for both Renault Algérie and Toyota Algérie.

Looking forward, we would anticipate continued upward growth (of around 5% per annum) for vehicle sales, in line with a growing domestic economy. We forecast that total annual new vehicle sales should exceed 375,000 units in 2016. Moreover, if local car production takes off as we expect, we would anticipate making additional upward revisions to our overall sales figures, as locally produced cars would likely be cheaper, thereby boosting domestic demand.

Optimistic Start Date Of 2013 For Renault Production As 2012 began, negotiations between the Algerian government and Renault over the opening of a new car manufacturing plant were still said to be ‘well advanced’, according to local media reports. Although no date for the signing of a contract has yet been fixed, a government spokesman has said that some form of agreement is near. Despite earlier speculation that the new plant would be located at Rouiba, there is now growing expectation that the new plant will instead be sited at the Bellara industrial area near Jijel. The planned joint venture would reportedly see the French carmaker take a 49% stake in the project, with the remaining 51% to be held by a variety of Algerian interests. These would most likely involve both private and public sector concerns.

Given that a deal has yet to be signed, it is becoming increasingly unlikely that the production of the first mass-produced Algerian car can be accomplished by the government’s preferred date of end-2013. However, once the facility is opened, the first phase of production should see 75,000 vehicles produced by the factory, according to Benmeradi, rising to 150,000 in a second stage of development.

The authorities also remain in negotiations with German carmaker Volkswagen (VW) over the potential commencement of autos production within Algeria. So far, two meetings have been held between the two sides, with VW reportedly considering a recent technical proposal put to it by the Algerian government.

While BMI had already expected Morocco and Algeria to evolve into viable alternative production bases to rival Egypt, the risk associated with the political turmoil in Egypt could accelerate the process. The introduction of industry incentives, planned by the previous government to boost production and develop the supplier segment in Egypt is now uncertain, while the wider business environment is not conducive to foreign direct investment at this time. BMI also sees valuable sales growth potential in the two markets, with average annual growth over 2011-2016 of 5% in Algeria and 12% in Morocco.

Algeria Ranks Near The Bottom Of BMI’s New Business Environment Ratings Table This quarter, BMI has compiled a new Business Environment Ratings table for the auto industry across the Middle East and North Africa region. In this new table, Algeria currently ranks in seventh place, with its overall score constrained by the relatively small size of its domestic auto industry when compared to its regional peers. It also arguably offers less short-term upside to auto manufacturers than the wealthier Middle Eastern states covered by BMI. However, we would expect Algeria to move up our ratings charts once planned new production facilities come onstream in the coming years, thereby expanding the size of the domestic auto industry considerably. A full rating table for the MENA region and accompanying commentary can be found in this report.