Car manufacturer Volkswagen announced on November 27 it has officially entered into a joint-venture with SOVAC, its concessionaire in Algeria, to start in the second quarter of 2017 the construction of an assembly unit. “This decision is a logic step forward in our path to increase our car sales in Algeria. Volkswagen has decided to acquire the stake in SOVAC Production due to the long and profitable partnership that has united us for years,” said Joseph Baumert, head of production and logistics at Volkswagen.

Sovac Production SPA will have an assembly capacity of 100 cars per day and produce besides Volkswagen cars, SEAT and Skoda. The executives of the Algerian company said it could supply cars which will cost 20% less.

The project is however being developed in a challenging environment. Concerned about the pressure of car imports on exchange reserves, the Algerian government adopted a law which will condition starting from January 2017, the exploitation of an automobile concession license, and the establishment of a car assembly or spare parts unit.

Amid fall in oil revenues, the law happens to be more than necessary. SOVAC thus took a huge step in repositioning itself in an Algerian very profitable market. Volkswagen for its part will take a minority stake in the joint-venture for an undisclosed amount. The German group however highlighted that it would invest a lot into training and technological development.

Idriss Linge