VW forms JV in Algeria to make Golf, other models starting in 2017
FRANKFURT -- Volkswagen Group has formed a joint venture with Algerian sales partner SOVAC to assemble cars in the North African country, aiming for production capacity of more than 100 vehicles a day starting in spring 2017.
VW Group will hold a minority stake in the joint venture, SOVAC Production SPA, which will produce vehicles from the VW, Volkswagen Commercial Vehicles, Seat and Skoda brands in Relizane, which is 220 km west of Algiers, VW said in a statement.
The models that will be produced at the $170 million plant will be the VW Golf, Seat Ibiza and Skoda Octavia compact cars and the VW Caddy car-derived van. All four are underpinned by VW Group's MQB architecture.
"We will be able to meet demand in Algeria," said VW executive Josef Baumert. "For us, this is a logical step toward increasing vehicle sales in Algeria in the long term."
SOVAC and VW have been a sales partners since 2001, VW said, adding it delivered 30,000 new vehicles via SOVAC in 2015.
Algeria has been trying to boost investment and diversify its economy to compensate for a drop in oil and gas earnings and reduce a heavy import bill. But moves to reform the economy and improve foreign investment have proved difficult with oil and gas production accounting for 95 percent of the country's export revenues and 60 percent of the state budget.
In July the country approved a new investment law aimed at improving investment terms outside the oil industry.
"This shows that the investment climate has improved," Algerian Industry Minister Abdesselam Bouchouareb said at a signing ceremony in Algiers on Sunday. "Our main goal is to reduce imports."
SOVAC's CEO, Mourad Oulmi, said the move would help reduce the cost of cars in the North African country, and that SOVAC aimed to start exporting "in the next few years."