A Brief Flashback to Morocco’s Automotive sector

A brief flashback to Morocco’s Automotive sector development to forecast the future of the sector in the Middle East

Geographically and demographically the Middle East & North Africa regions carry the highest potential of offering ideal infrastructure for automotive, precisely, cars (Automobile) manufacturing. Yet, this is not the case

In this article, we deep dive into the sectoral development of Automotive in the Middle East by flashing back & forth through the historical perspective to show the coming foreseeable future of car manufacturing in the Middle East.

In 2022, Morocco exported fully manufactured cars by $9 billion USD, this record shows how crucial is the automotive sector in contributing to the economy’s gross domestic product (GDP), especially if this amount is indeed higher than the income of the Suez Canal from the same year that recorded $7 billion.

This reflects a large history of focus in Morocco to create an automotive ecosystem, starting from the founding of SOMACA as the first automotive assembly company owned by the state followed by regulatory measures to promote locally manufactured cars that involved not only incentives for the local market but also the increase of importing tariffs that increased the foreign cars final market price, and accordingly encouraged the purchase the locally assembled ones that have a more attractive market price.

Those strategic measures motivated key market players to enter Morocco as a green field investment, which was one of the very early foreign direct investment (FDI) projects achieved in the Middle East.

The timeline of having FDI inflow from key market players to Morocco is fascinating, for example, with Fiat investment in 1962, Renu in 1966, Peugeot in 1980, and Citroen in 1986.

With opening the market and reaching market economy, the reduction in tariffs policy took place and therefore the price of imported cars decreased, and the number of imported cars increased by 100% from 35 to 70 which reduced the production capacity of SOMACA from 20,000 to 8,000 cars per year.

Nevertheless, SOMACA got a strategic plan and placed another investment deal with Fiat to produce one of the most known cars in the EMEA region, UNO. This success is until today, having the large car manufacturer, Stellantis celebrating their 1,000,000 cars production.

Such success positioned the automotive sector to be approximately 16% of Morocco’s GDP with production of approximately 1 million cars per year of which 90% of them are exported to Europe and records approximately 9 billion USD market volume, considering production & exports.

The question remains, what are the determinants that encouraged key market players to choose Morocco?

From an economic point of view, Morocco offers all the determinants automotive producers would need:

1. Location: geographically Morocco has great proximity to Europe while it is located in North Africa, connecting Africa to Europe and bordering the Atlantic Ocean & the Mediterranean Sea This not only positions Morocco as a top logistics location but also makes Morocco a meeting point for cultures.

2. Talents: through the mentioned long history in automotive, Morocco has the most talented labour force in the region that has the know-how across all the value chains of production.

3. Free Trade Agreements (FTAs): Morocco enjoys FTAs with +50 countries that give access to approximately 1 billion consumers.

4. Ecosystem: Morocco is unique by having the availability of raw materials & components required in the automotive sector that results from having a strong sectoral infrastructure gathering the players required within the production value chain.

5. Facilitation: foremost investment attraction, incentives, facilitation & aftercare play a vital role within the site selection process of key market players, which Morocco offers through prestigious institutes with the mandate to further enhance Morocco’s automotive industry.

Using Morocco as a successful case study for the development of the automotive sector in the Middle East showcases how the region is able to attract and sustain automotive manufacturing which is one of the most advanced sectors technically as well as economically due to its impact on an economy through transfer of technology, job creation & exports that can easily enhance the balance of trade of an economy.

The case of Morocco could be implemented in other regional markets to ultimately sustain the region to be a car manufacturing hub.

In the coming insights about the vehicle manufacturing indsutry in the Middle East, we will visit the automotive sector in other key markets, such as the Kingdom of Saudi Arabia, Tunisia, UAE, and Egypt. On top, we will review how other regional markets can benefit from each other in attracting automotive producers to the Middle East & North Africa.

An Insight blog post by Investment & Trade Intelligence.