Interview: Amine Melouk
How can local companies participate in the emerging Algerian automotive industry?
AMINE MELOUK: Our case was made possible thanks to a market surveying mission led by Renault, whose aim was to develop a local subcontracting factory to substitute the importation of spare parts. SAREL used to be a producer of telecommunications devices, so it required significant upgrades from our side to meet industry standards. We had to go through several international certification processes and every part that was produced in Algeria needed to go through a validation process in the Renault Technocentre in Paris. Since 2016 boosting the local subcontractor ecosystem seems to be at the top of the government’s agenda. This trend could continue over the medium term as many foreign actors are either in the process of setting up a production unit in the country or are thinking of doing so, including Hyundai, Peugeot Citroën, Kia and Ford.
What else can be done to strengthen the sector?
MELOUK: In order for small and medium-sized enterprises to benefit from the arrival of big international car manufacturers, we first need to enhance our human resources. For example, the segment of quality management is key to the automotive sector, but it is almost impossible to find workers with these skills domestically and we recently had to hire someone from Tunisia for this role. Therefore, investments should be channelled into the development of training centres and specialised schools. Furthermore, employees’ must learn to make better use of computing systems as part of the manufacturing process.
The financial sector should also play its part by easing access to credit; most raw material suppliers request letters of credit that simply do not exist in Algeria, because the majority of small industry owners finance their acquisition of new machinery with their own funds. Significant efforts need to be made as well by the Customs authorities. According to the law, imported automotive accessories such as clamps, felt or foam pieces are supposed to be exempt from Customs duties and tariffs. Nevertheless, these instructions have not been sent to administrators, so importers keep paying certain fees. Overall, these processes need to be modernised. For instance, if a manufacturer needs to fix one of its moulds outside the country, this can take up to 12 months because of excessive red tape, whereas it takes only four or five days in Europe. Nobody in the sector can afford these kinds of waiting periods. The automotive world will not adapt to Algeria, so Algeria must adapt to the automotive world.
How do you foresee the future of the industry?
MELOUK: We are positive about the evolution of the sector, and we are witnessing a growing interest from local industrial actors that want to take part in it. Overall, automotive rolling stock is ageing in Algeria, and the recent import quotas imposed by the government are preventing market demand from being fulfilled, which greatly benefits car manufacturers that produce domestically.
Nevertheless, Algeria is at a disadvantage when compared with other countries in the region. Currently, being a subcontractor for the automotive industry is not profitable because the profit margins are extremely tight, but this can be expected to change following an upcoming increase in volume due to the multiplication of producers situated in the country. Hyundai, PSA and Volkswagen are all expected to start production in 2018, and with this economies of scale should appear – driving up profits. In the long term, the opportunity to export spare parts remains extremely interesting, as Algeria is ideally located to supply both Africa and the Mediterranean basin. In short, the sector has now taken root and possesses great potential for expansion.
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