Algeria has been shaken by political upheaval and uncertainty since February 2019, when protests against the government of longtime ruler Abdelaziz Bouteflika resulted in his ouster two months later.
One casualty has been Algeria's fledgling auto industry. One by one, factories operated by Renault, Volkswagen Group (led by Spanish brand Seat) and Hyundai-Kia, with local partners, that assembled semiknockdown (SKD) and complete knockdown (CKD) kits have been shuttered since last autumn. The head of Sovac, an Algerian company that was a majority shareholder in VW's operations, was arrested last spring on fraud charges.
Algeria has blocked the import of CKD/SKD kits since mid-2019, partly by imposing quotas on their total value. President Abdelmadjid Tebboune singled out Renault in an interview at the end of February with the French newspaper Le Figaro. Tebboune said many of the country's economic problems stemmed from unregulated imports of goods, which had "killed domestic production."
"The Renault factory here is nothing like the one in Morocco," he said. "How can we create jobs when there is no integration, no subcontracting?"
The reasons for the shutdown are complex, said Arezki Daoud, lead analyst and president at ME Risk, a consulting company. Algeria sought to duplicate Morocco's success in the auto sector, he said, but some of the operations were not set up in a sustainable way and were tied to the country's oligarchs.
That in turn made them an easy target for prosecutors to arouse populist sentiment, Daoud said. "It speaks of a corrupt regime, an administration that didn't have the proper vetting system," he said. But he added that the auto sector was reflective of a "generalized freeze that is affecting the Algerian economy."
Renault's factory in Oran halted production at the end of February. VW Group's factory in Relizane produced more than 53,000 cars in 2018 for the Seat, Skoda and VW brands. But that figure fell to just 25,000 in 2019, because the carmaker reached its quota limit of $600 million worth of imported kits, a Seat spokeswoman said.
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Production came to a stop in December as the factory was denied a license to produce in 2020, she said. VW Group is awaiting a decision by the government on a future automotive strategy, one that is likely to include a requirement for local content, experts said.
"We are open to being flexible and adapting to the model," the Seat spokeswoman said. "We are still interested in the market."
PSA Group has not yet opened its Oran factory, announced in 2017. A PSA spokeswoman said the automaker remained committed to Algeria, but was still awaiting direction from the government regarding an automotive strategy.
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