Inteview: Guillaume Josselin
What makes Algeria an attractive market for automobile manufacturers?
GUILLAUME JOSSELIN: There are two factors to consider when determining the feasibility of an industrial automobile project: one is the level of local demand and the other is the potential for growth. Algeria clearly meets these criteria, with roughly 100 vehicles per 1000 inhabitants, compared to 600 in Europe and 800 in the US. Algeria is a key market for Renault: we are the leader here, and it is the second-biggest automobile market on the continent after South Africa. Each year 400,000-450,000 new units are sold in the country, and this figure could quite conceivably increase.
As for future potential, the average age of vehicles in operation in Algeria is around 16 years, whereas in Europe it is only about eight years. This underscores the opportunity for manufacturers that are committed to promoting modern safety standards. There is also a clear disparity between the age of vehicles in urban centres versus the rest of the country. Algeria is large, the population is young and, although public transport is improving, it does not yet meet demand. Future housing projects undertaken outside of urban centres will mean that cars will continue to be necessary. Consumer credit programmes will also be an important factor in determining growth in the sector. Between 2006 and 2009, when the consumer credit programme was available, roughly one in two people purchased vehicles under the scheme.
How positive is the general outlook for the automobile industry in Algeria?
JOSSELIN: In the 1960s and 1970s Algeria’s automobile industry gradually disappeared, and current efforts are seeking ways to reinvigorate it. For example, we have recently created the Renault Algeria Academy to help develop the skills needed for an emerging automotive industry. Importing vehicles is not a permanent solution and cannot continue indefinitely. Moving towards local production is the most logical strategy. There is a strong demand for technology transfer, and participating in this is much easier when industrial activity is already in place. While the 51:49 rule, which requires majority local ownership of foreign investments, poses some challenges, it can also be quite valuable, as it can be helpful to have a local partner on hand who can steer you towards the key decision-makers. Algeria could become an important exporting country for sub-Saharan Africa. However, the current high-level of domestic demand has made the local market our primary focus in the short to medium term. To that end, Renault is working around the clock. After achieving our initial production goal of 25,000 vehicles, we have since increased that number to 35,000 vehicles per year.
What factors will affect the growth of the industrial subcontracting segment ?
JOSSELIN: It is important for the level of industrial activity to be sufficient enough to create demand for subcontractors’ services. If a given country only produces 10,000 vehicles per year, that is not enough to keep subcontractors busy. That is why large industrial projects are of key importance; they create demand, which allows for increased local integration into the value chain. For that to happen, producers need to step up production quickly to attract subcontractors, and the government needs to incentivise industrial activity, even among its smaller contractors.
Furthermore, industries should invest in increasing local know-how through training programmes and technology transfers with partners. Additionally, if more large industrial players enter the market, competition will increase. This should be encouraged, as more work will then be available for subcontractors. If three or four automobile manufacturers can produce 150,000 to 200,000 vehicles each year, this will help stimulate the growth of the subcontractor sector.
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