Rabat – The Moroccan automotive market continues to prosper despite recent disruptions in the supply chains due to the ongoing COVID-19 pandemic and the war in Ukraine.
The country’s automotive sector has grown exponentially in the past two decades, making it a leading player and exporter in the global and African markets. With a focus on exportation to Europe, Morocco is currently producing parts for luxurious cars such as BMW, Audi, and Range Rover.
Having built a solid reputation as a reliable partner on the global stage, the North African country has become an exciting, appealing market for foreign investors in the automotive sector. The country’s low cost and skilled labor, as well as its state-of-the-art infrastructure, have been its key selling points.
With Morocco planning to decrease its reliance on imports and extend its export efforts, investment of Moroccan capital in the sector and flexibility in face of current crises and opportunities are key for economic growth and prosperity.
Overview of the Moroccan market
In 2020, the Moroccan automotive sector reached a production capacity of 700,000 vehicles per year and created more than 180,000 jobs, underpinning the objectives of the Industrial Acceleration Plan (PAI) for 2014-2020. The sector further generated, in the same year, a turnover of MAD 72.18 billion ($7.25 billion) from exports to over 74 countries.
Morocco’s ambitions for the sector are clear: to increase local integration to 80% by 2025, decarbonize production, and integrate Moroccan capital into the sector.
In 2021, Morocco ranked 19th globally based on its production capacity and second in Africa following Egypt in the eighth position, according to data from the International Organization of Motor Vehicle Manufacturers.
The fruits of Morocco’s vision derive from the country’s long-standing and evolving expertise in the automotive sector.
The sector’s history goes back to 1959 when the then-state-owned Moroccan Society of Automotive Construction (SOMACA) established the first assembly factory in Casablanca. The initiative led to the opening of a series of vehicle production and assembly factories by renowned companies such as Renault, Peugeot, and BYD.
SOMACA was privatized in 2003. The news attracted the interest of Renault, which was looking for low-cost and experienced labor to produce some of its popular models. The group then chose Morocco to produce Dacia Logan, its popular low-cost product.
In March 2019, Renault Group secured full ownership over SOMACA, reinvigorating the dominance of the French multinational in Morocco’s automotive sector. Another key manufacturer is the Italian-American Stellantis, the merger of PSA – house of Peugeot, Citroen, and Opel- and Fiat Chrysler Automobiles (FCA).
Although Renault and Stellantis dominate the construction axis of Morocco’s automotive sector, numerous European, Chinese, and American companies have in the past decade invested in factories specialized in cabling, batteries, and production of aluminum parts such as rims, powertrains, and chassis.
The year 2012 was a turning point in Morocco’s automotive sector — with the launch of the Tanger Automotive City, the Atlantic Free Zone in Kenitra, and the Technopolis Free Zone in Rabat-Sale. The three free trade zones have increasingly attracted foreign investments and companies looking for a cost-effective destination for the relocation of their factories. The list of companies includes Lear, Grupo Antolin, and TE Connectivity.
As the Moroccan Institute of Strategic Intelligence (IMIS) has pointed out in its latest policy paper, while Morocco produces various parts essential to the construction and assembly of vehicles, the country has to invest more in developing commodities such as radios, screens, and tires.
Downside of globalization
Looking for low-cost production lines, giant automotive companies like Renault and Stellantis groups have relocated their factories to Africa and Asia.
Morocco’s modern infrastructure, geographic proximity to Europe, and partnerships with the EU have been the best selling points for the country as it hopes to reduce reliance on imports, address local demand for new vehicles, and advance the Made in Morocco label.
However, the severe, COVID-induced disruptions in the global automotive market supply chains have prompted Morocco to temporarily cool or water down some of its grand ambitions.
The automotive sector’s COVID-induced crisis was most prevalent in the shortage of semiconductors in the global market.
Microchips are essential for the operation of cars, particularly electric vehicles. They help control the powertrain and battery and are indispensable in cars’ performance of usual functions like using radio and opening or closing windows.
The global chip shortage led to a shrink in vehicle production, reducing global production by 1.7 million vehicles between 2019 and 2021.
But the war in Ukraine has brought a new wave of interconnected crises. Notably, Ukraine supplies roughly 50% of the neon gas, which is extensively used in the manufacturing of semiconductor chips. The impact of the current shortage extends to manufacturers of electronics, computers, phones, and even airplanes.
Last month, Toyota Motor reported a 20% in its domestic production for the April-June quarter due to the microchips shortage.
Vehicle manufacturers have also worked on adapting their designs to cut from the use of microchips while minimizing costs related to the delays in the supply chain.
While the microchips crisis highlighted the fragility of the supply chain, Morocco has the potential to benefit from emerging post-COVID trends.
With European countries considering the relocation of their automotive production from, particularly, China to Eastern Europe and neighboring countries, Morocco remains an eminently appealing market. Key in the country’s attractive offers from skilled labor to well-established infrastructure — including free trade zones, incentives for foreign investors, and a solid network of ports, railways, and roads.
The shift comes at a time that European countries are working on returning electronic, pharmaceutical, industrial, and food production home. Consulting firm PWC and French National Purchasing Council argued that the automotive sector remains moderately critical for France and the rest of the EU which opens new doors to the Moroccan automotive sector.
China has also expressed interest in relocating 85 million jobs to Africa, and Morocco is a favorite candidate since the two countries signed in January a joint implementation plan for the Belt and Road initiative. The agreement aims to consolidate cooperation between Rabat and Beijing, underpinning China’s plan for economic growth as a superpower.
Faced with high energy bills due to the rise in carbon prices, China is looking for a new destination for its energy-intensive activities such as vehicle production.
With the Made in Morocco label gaining international recognition, the North African country has the potential to attract more investments in the automotive sector to extend its operations to all levels of vehicle production as well as respond to domestic demand for new cars and public transport vehicles.
As the ongoing shortage of microchips has unveiled the fragility of the global supply chain, advanced economies continue to rely on reliable partners to reduce production costs.
In such a context, Morocco is understood to be working on training future engineers, managers, and senior technicians to advance the country’s automotive sector and address the economic consequences of a severe brain drain. Quality education, practical training, and the creation of job opportunities are at the core of Morocco’s New Development Model.
Renowned for its efforts to mitigate climate change effects, Morocco has invested in greener energy for a sustainable future. International organizations, NGOs, and investment partners have all commended Morocco’s ambitious goals for increasing renewable energy share in its electricity mix to 52% by 2030 and 80% by 2050.
However, Morocco remains heavily reliant on energy imports. As global fuel and gas prices skyrocketed after the war in Ukraine, Moroccans joined the international outcry against unaffordable fuel prices. This has prompted the government to commit to supporting the transport sector. Yet the real alternative is clear: As suggested by a number of analysts and world leaders, what is really needed at this critical juncture for the global economy is an immediate transition to clean energy.
The ongoing war in Ukraine was in this sense just a catalyst for a demand that the environmentalists have been making for years. In Africa, Morocco was the first to install Tesla’s superchargers network, which is currently expanding across the country as more Moroccans lean towards hybrid and electric cars as safer, cleaner, and cheaper alternatives. And Morocco can use this opportunity to play a leading role in the rising hybrid and electric cars market.