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Why Morocco is Africa’s Automotive Industry Hub

Why Morocco is Africa’s Automotive Industry Hub

Taroudant – Morocco’s automotive sector has witnessed a boom over the last decade and has become Africa’s automotive industry hub.

Foreign investment has poured into the Kingdom’s automotive sector over the last decade. Recent investments in Morocco’s automotive sector include the $615 million PSA Peugeot Citroen’s factory, planned to be opera­tional in 2019.

The company aims to build 90,000 B- and C-segment vehicles a year and engines for local and regional markets.

There are a number of factors that have contributed to the success of the automotive industry in the Kingdom, making it a leader in the domain. After the Arab Spring had shaken most Arab countries, Morocco overtook Egypt in 2012 as the leading automaker in North Africa, ranking second in Africa behind South Africa.

Thanks to its strategic geo­graphic location and proximity to Europe, the Middle East, and sub-Saharan African countries, Morocco has become an ideal location for car manufacturers to establish plants. Attracting foreign investment from around the world, Morocco is deemed an ideal country for companies aiming to export their products to Europe, Africa and Middle East.

Morocco’s political stability and terrorism-free zone are other criteria that have encouraged international investors to trust in the Kingdom. In addition to the country’s macro-economic stability, Morocco recently introduced structural reforms designed to improve the business climate.

To boost industry and attract foreign investors, the Moroccan government has set out a strategy to facilitate administrative procedures for new investors along with a very encouraging tax system. The government grants a 5-year corporate tax exemption for automotive companies setting up shop in the country. It also offers a 25-year tax exemp­tion for those companies as long as most of the production is destined for ex­port.

Moreover, the government helps financially with up to 10% of the total investment needed by new companies in the automotive sector to set up their facilities, and offers in place training programs.

Morocco’s competitive human resources, and low-cost labor force, is a key factor luring international automotive manufacturers, reducing the costs of production and increasing the margins of profit.

While some neighboring countries have been repeatedly subject to terrorist attacks, Morocco stands as an exceptional case in the region thanks to “a comprehensive counterterrorism strategy that includes vigilant security measures, regional and international cooperation, and counter-radicalization policies,” according to the US Country Reports on Terrorism 2014.

According to a report published by the Emerging Markets Private Equity Association (EMPEA) last April, Morocco emerged as North Africa’s top investment destination for private equity, attracting 43% of the total invested in the region between 2010 and 2014.

The statements of the foreign automotive companies remain striking testimonials and evidence for Morocco’s leading position in the car industry sector in the region.

Ford, the American company which opened two sales offices in Morocco, in Casablanca and Tangier last May, “sees Morocco as a country that has skilled labor and extremely good infrastructure,” said Ford Middle East and North Africa director Kalyana Sivaganam.

“We see a lot of growth in the automotive industry, we see good developing infrastructure for parts,” he added.

Prior to the signing of the agreement to set up a PSA Peugeot Citroen factory in the Kingdom, Carlos Antunes Tavares, Chairman of the company’s Managing Board, said last June, “Given its world-class infrastructure, notably in terms of car production and export logistics, in addition to the quality of training of human resources specializing in automobile industry, Morocco was chosen to host the new production plant of French car manufacturer PSA Peugeot Citroen.”

“Thanks to the level of its infrastructure and training, Morocco is well-paced to attract enterprises that are willing to bolster their exports to African markets,” said Tavares at a press conference prior to the signing of the agreement to set up a PSA Peugeot Citroen factory in the Kingdom.

With insightful policies in the sector spearheaded by the King Mohammed VI, and a growing interest on the part of other well-known companies like Volkswagen and Hyundai in the Kingdom, Mo­rocco is paving its way steadily to become Africa’s leading automanufacturer.

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