By the Blouin News Business staff

Peugeot’s North Africa expansion met with open arms

by in Africa, Europe.

French President Francois Hollande (R) meets with Algerian Prime Minister Abdelmalek Sellal at the Zeralda state residence, on June 15, 2015, in Algiers. ALAIN JOCARD/AFP/Getty Images

French President Hollande (R) meets with Algerian P.M. Sellal (L) in Algiers, 6/15/15. ALAIN JOCARD/AFP/Getty Images

French auto firm Peugeot-Citroën’s Africa manufacturing push now looks likely to include Algeria. Abdeslam Bouchouareb, Algeria’s Minister of Industry and Mines, announced on Monday that talks were under way for the creation of a manufacturing plant that would produce three of the firm’s vehicle models. This comes right on the heels of Peugeot’s first FDI in Africa — the $628 million contract it signed on Friday with Morocco to build a 90,000-car capacity manufacturing plant in that country. And last July, the firm partnered with PAN Nigeria Ltd. to assemble and sell Peugeot cars there.

Algeria and Morocco are of particular strategic importance to France, their former colonial ruler. They are geographically close to France, with friendly political ties, extensive security cooperation, and growing economic links. It is also helpful that French is widely spoken in Algeria and Morocco, and especially that these countries’ wages are much lower than those in France. Morocco has become an important FDI hub for the aerospace and auto industries thanks to its skilled workforce, financial incentives, and wage costs that are typically four times lower than in France. In fact, the auto industry has created around 80,000 jobs in Morocco, accounting for about 10% of the country’s industrial workforce. Peugeot’s latest expansions follow in the footsteps of rival French automaker Renault, which opened up several car manufacturing plants in Morocco three years ago, and another in Algeria last year.

France is among the top trading partners for both Morocco and Algeria, and their political stability makes them attractive for scaling up bilateral investments and partnerships. To this end, Paris hosted the first Algerian-French Economic Forum (with over 300 business leaders, professionals, and heads of economic institutions of both countries in attendance) on June 11.

Political ties are very close, demonstrated most recently by French President Francois Hollande’s working visit to Algeria last week. He said bilateral relations with Algeria were “warm,” and that his just-concluded talks with Algerian President Abdelaziz Bouteflika were “constructive and important.” Hollande emphasized the two countries’ security collaboration, particularly in the Sahel: “I salute the work that Algerian authorities undertook in Mali after our military intervention. Safety is fighting against terrorism. I want to highlight our common fight against this enemy.” He also broke the news that Peugeot’s plan to build a car manufacturing plant in Algeria was “in advanced discussions” and that both Algerian and French parties were working to facilitate the project.

Likewise, at a joint conference with Morocco’s Head of Government Abdelilah Benkirane on May 28, French Prime Minister Manuel Valls stated that “France aims at maintaining its position as Morocco’s key partner in all fields.” He expressed satisfaction regarding French investments in Morocco, where 750 French companies have generated 120,000 jobs, and emphasized the importance of the two countries’ joint efforts to counter terrorism and radicalization. He also said “We would like to encourage new French-Moroccan partnerships in Africa notably in fields relating to food security, economic investments, and higher education.”

On this solid foundation, Peugeot may expand its Morocco factory to an annual capacity of 200,000 cars in the future. If the auto market in Africa and the Middle East stays on track to reach the estimated 8 million new vehicle purchases per year by 2025, then more such factories are likely to be built in Morocco and Algeria — as long as political stability is maintained, that is.