Peugeot-Citroen develops supply chain into North Africa

On Friday (19/6) the company announced that it would build a ‘fully built-up’ vehicle plant in the province of Kenitra in the north of the country. The plant will include an engine plant and has a long term target of producing 200,000 cars a year, although initial output will be 90,000. In the short-term the local component supplier base will provide 60% of the content of the vehicle which will rise to 80% in the long-term.

Whilst French car makers have had a production presence in North Africa for sometime, with Peugeot-Citroen also operating a modest plant in Algeria as well as formerly in Casablanca, the present expansion marks an important change. Its runs parallel to the establishment of the very large Renault facility within the port complex at Tangiers and marks a continuation in the gradual shift of automotive assembly operations away from developed economies.

PSA Peugeot-Citroen’s overt rationale is that the new plant will enable it to strengthen sales across North Africa and the Middle East, with the objective of selling 1m cars in the region as part of the vehicle maker’s plan to broaden its market base out from Western Europe. As part of this strategy Peugeot-Citroen is planning to open ‘Complete-Knocked Down’ plants in Nigeria and revive its presence in Iran. Yet the Morocco plant is of a different order to these and marks a significant development in the company’s production strategy.

Morocco has positioned itself to attract automotive manufacturing with workforce training and logistics based around the port of Tangiers which enables quick access to European supply bases. Labour costs are a fraction of those in Western Europe and probably cheaper than those in Central Europe. A new plant in a location such as Morocco offers the potential for reduced production costs not just for vehicles sold in North Africa but potentially for global sales as well.

The movement of automotive assembly operations to locations such as Morocco, Turkey, Mexico or Thailand reflects how globalisation is affecting the automotive supply chain, with the attraction of lower labour rate counter-balancing the logistics problems often encountered in such economies.