Stellantis puts Algerian car industry on road to recovery

Reuters/Gilles Guillaume

• $216m initial investment
• Tafraoui plant to build Fiats
• Academy to be set up

Multinational car maker Stellantis has announced the start of production at its factory in Algeria, with a commitment to expand further to help the ailing local market.

Four Fiat models will be built, including the Fiat 500 and Fiat Doblo, as part of an initial €200 million ($216 million) investment in the plant in Tafraoui, which has an annual assembly capacity of 90,000 cars.

The Stellantis project has already created 500 jobs in Algeria, with the aim to increase that to 1,200 by the end of 2024 and 2,000 by 2026. 

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Algeria wants to reboot its local automotive industry, which was crippled by a vehicle import ban introduced in 2014 in an attempt to reduce the nation’s import bill.

In January car imports resumed but are limited to vehicles no more than three years old.

China’s JAC Motors Company reportedly plans to build a manufacturing plant in Algeria with a production capacity of 100,000 cars per year, while both Renault and Hyundai have also resumed operations in the country.

According to S&P Global, new vehicle registrations in Algeria were estimated to have reached an all-time low in 2021, at 21,000, from the highs of more than 500,000 in 2012 and 2013. 

In 2022, the market was forecast to rise to just above 25,000 cars.

S&P said despite the partial lifting of import restrictions and a new industrial assembly regime being put in place, car production plummeted 97 percent in 2020 to 4,400 units and remained relatively low in 2022 at about 7,000.

A letter of intent signed by Stellantis and Algerian authorities this week aims to accelerate growth of local manufacturing.

Under the plan, Stellantis, one of the world’s biggest automakers with brands including Alfa Romeo, Chrysler, Citroen, Peugeot and Vauxhall, will expand its production capabilities in the North African country as well as setting up an academy in partnership with the education ministry. 

“This is the beginning of a journey of growth and development. With today’s further announcement, we are poised to increase our commitment towards the country,” Stellantis CEO Carlos Tavares said. 

Stellantis has also committed to localising the industry, and is aiming to hit a locally made rate of 35 percent in 2026. The Amsterdam-headquartered company launched its commercial operations in Algeria in March and now has more than 50 points of sale, offering nine models from Fiat and Opel.

Analysts at BMI said they expect to see growth in vehicle sales this year as a result of the easing of the import ban, but they would remain a fraction of the numbers seen pre-ban.

“We believe that the lifting of the vehicle import ban, the uptick in local vehicle assembly and the market’s strengthening currency will result in decent growth in Algeria’s vehicle sales in 2023,” they said.

The ban on diesel-powered vehicles is adding to the challenges facing Algeria’s vehicle sales market over the short term, BMI said.

The World Bank said Algeria’s economy returned to its pre-pandemic level in 2022, with the recovery extending to the first half of 2023. 

Higher investment, including in large industrial projects such as car manufacturing plants, assisted economic activity in the first quarter of 2023. It is expected to keep supporting growth to 2025, said Kamel Braham, the World Bank’s resident representative to Algeria.

Braham said that sustained efforts to enhance Algeria’s business environment and attract private sector investment will be vital to maintaining this trend.

The World Bank’s Ease of Doing Business database ranked Algeria 157th out of 190 countries in 2020, the latest figures available. 

Since 2020, the government has taken steps to boost foreign and domestic investment by issuing a new hydrocarbon law, partly lifting restrictions on the foreign ownership of domestic firms, adopting a new investment law and working to issue a new money and credit law, and a public-private partnership law.