(Ecofin Agency) - French group Peugeot PSA just entered into a Joint-Venture agreement with three Algerian partners. This is to open a car manufacturing factory especially for the Algerian market. 

The first cars will be delivered in 2018, by a plant located in the Oran suburb, 400km West of Algiers.

According to the group, the agreement is signed after two years of negotiations, and should help produce over five years, 75,000 Peugeot cars, with a partial integration rate, meaning that a significant part of spare parts will be made in Algeria. This, in line with the government’s will to promote “made in Algeria” products in the car industry.

The Oran factory which will partially launch in 2018, will be truly operational in 2019. It will initially create over 1,000 direct jobs.

PSA holds 49% interest in the €100 million ($117 million) firm’s portfolio. Remaining 51% are shared among three Algerian companies, in line with the law regulating investment in the country. According to this law, foreign firms cannot invest in Algeria without partnering with one or many local firms which will hold the majority stake. In this case, the Algerian partners are Condor Electronics (15.5%), Palpa Pro (15.5%) and Entreprise Nationale de Production de Machines-Outils (PMO) (20%). 

More and more car manufacturers are getting interested in the Maghreb market. This is as the region’s countries initiated a major process to transform the structure of their economy, which still mainly depends on commodities.

Despite the car industry not being at its best at the moment, it remains a priority for Algerian authorities who wish to reduce reliance on oil which represents 95% of its foreign exchange reserves. The strategy aiming to promote the assembling of vehicles on site with a high integration rate is proof of these authorities’ efforts to be less dependent to the exterior, and improve balance trade which has widening since the drop in oil prices in 2014.

Since 2012, many car makers such as the French Renault, the South Korean Hyundai, and the German Volkswagen set shop in Oran, Tiaret and Relizane.

Fiacre E. Kakpo