PARIS -- PSA Group has started production at its new factory in Kenitra, Morocco, with the Peugeot 208 as its first model.
The 557-million-euro plant has an annual capacity of 200,000 vehicles, and most will be exported.
The factory will produce cars on PSA's new CMP architecture for compact and small cars. In addition to the Peugeot 208, it could produce expected new versions of the Citroen C-Elysee and Peugeot 301, three-box cars that are mainly sold in regions outside of Europe.
PSA says the plant will serve 80 countries.
Production will start at 100,000 vehicles and ramp up to 200,000 in the next two years. PSA is also building gasoline engines at the plant, many for export to other group factories in Europe. The plant will be able to produce 200,000 annually.
With the opening of the factory, which will employ 4,500 people at full capacity, PSA says it now has a complete ecosystem in Morocco.
Its regional headquarters are in Casablanca, and the Kenitra plant will be served by a technical center with 500 engineers, and 27 suppliers that have built factories and assembly plants in the area. All told, the factory will create around 20,000 direct and indirect jobs.
Other automakers and suppliers have set up shop in Morocco, taking advantage of low wages compared to Europe and generous incentives from the government, as well as easy access to major ports. Renault has two factories in the country -- one in Tangiers with an annual capacity of 400,000 vehicles and one in Casablanca that builds around 85,000 vehicles a year.
Among the benefits offered to PSA and other automotive businesses to locate in the Kenitra trading zone include exemptions on corporate tax (for a limited time), value-added tax and customs duties. The government is also providing training subsidies for PSA workers. In return, PSA has agreed to export 85 percent of the production and source a high percentage of parts locally.
PSA will also continue to build the 208 at its Trnava plant in Slovakia.