Renault signs agreement for a factory in Algeria

After more than two and a half years of discussions, Renault has reached a preliminary agreement with the Algerian government .The manufacturer  signed a framework agreement on 25 May for establishing a factory in Algeria, to support the development of the local market, according to reports. Negotiations continue for a final agreement, for an unspecified date, according to Le Figaro.

Renault expects an initial rate of 25,000 cars per year , hwoever an expert thought that. "It could increase over the
medium term based on the commercial success and development of the network  of suppliers" . The Algerian government favours a capacity of 75,000 cars per year, which could rise to 150,000.

Renault would begin production with the Symbol, Clio 2. This vehicle would be only for the Algerian market. This is a major difference from the factory in Tangiers, Morocco,  where 85% of low-cost cars are destined for export to Europe. The inauguration of this giant site (it can produce 400,000 cars a year to run), in February, clashed with
 the French presidential campaign  because of the  slogan  "Made in France"  and caused controversy because it was seen to threatened  car worker's jobs in France.

 This is an important issue for the Algerian economy because Renault is interested in a local production for a growth market in which it ranks number one, with one quarter of sales in Algeria. Last year, the groupsold 75,000 cars in Algeria (including 28, 000 Symbol), an increase of 18%. The Algerian market has jumped almost 32%, to 297,000 vehicles.

The challenge is even more crucial for Algeria, which does not have a car industry, unlike its neighbor Morocco. Renault  is seeking to remedy this.

Despite this framework agreement, the matter has not really advanced on its merits. Before a final signature, Renault and Algiers have to agree on rates, and on location, about which they have been opposed for months.  The Algierian government  wants the site moved to Jijel, a port city located 350 kilometers east of Algiers, in order to balance investments between  the regions.

In late April, Renault argued against this because the regionhas a weak industrial base. The French prefer to locate the factory in the suburbs of Algiers, in Rouiba, "so that cars are manufactured close to where they are purchased and in an area where  we can recruit the skilled workforce" , explained  Renault official, adding that negotiations were complicated by the "low industrial culture" of Algerian officials.

For now, Renault, which does not comment on this sensitive issue, expect the proposals on the location. "Renault will not  leave its place in Algeria to a rival. But it is waiting for  real support of the State and not of dirigisme, "says an inside source, pointing out that to that to attract Renault, Morocco rolled out the  red carpet with many incentives and support.

International companies investing in Algeria have found it more difficult over the last few years to reach profitable
agreements with an increasingly nationalistic government that is looking for investment on its terms. There have been difficulties raised over the repatriation of profits in certain cases.

 The issue of Algerian majority ownership of enterprises is seen as a disincentive by some investors.