Morocco’s automotive industry has grown from zero to being one of the biggest on the African continent in just over a decade. Building on this success the authorities are looking to attract more vehicle makers to set up facilities in the Kingdom. Morocco offers a combination of tax incentives, the presence of a large educated labour pool at competitive wages, preferential access to markets, dedicated automotive zones with supporting logistics infrastructure, and the presence of an already established network of component suppliers and subcontractors.
The development of the auto industry has been driven by the government, which has implemented a series of strategies since 2009 to support industrial growth in the kingdom. Morocco’s “Plan Emergence” identified at the time
six priority sectors, of which the automotive industry is one of the most important. In 2014, the Kingdom launched the Industrial Acceleration Plan, which is a new approach based on the implementation of efficient ecosystems aiming at the integration of the chain value and the consolidation of the local relations between big firms and SMEs.
The strategy, which will extend over the 2014-2020 period, is expected to generate half a million jobs in the sector and substantially increase the share of industry’s contribution to the GDP from the current 14% to 23 %. Parallel to that, Morocco invested massively in business enablers such as infrastructure, skills, incentives, business environment.
The 2012 FDI Magazine quoted Morocco’s development in terms of infrastructure as holder of the best Port Zone while Tangier Free Zone (TFZ) was ranked sixth Best Overall Free Zone. In terms of business environment, Morocco has gained 53 positions over thelast five years as rated by the World Bank’s Doing Business report. In 2014, the automotive Industry became the first export sector in Morocco to earn 40 billion MAD (3.7 billion €), a rise of 26% over 2013. Today, almost 70 Tier 1 and Tier 2 automotive suppliers covering the chain value are settled in the Tangier Free Zone (TFZ). A few kilometers away is Renault’s plant, the biggest vehicle assembly factory on the African continent. It has a production capacity of up to 400,000 vehicles per year.
Morocco has been upgrading the infrastructure of its P2I (integrated industrial platforms) in order to attract auto companies. It has been investing heavily in roads, highways, airports and ports for more than a decade. The country has the first airport hub in the region, and will have the first high speed train in Africa operating this year. Moroccan maritime connectivity has risen from the 84th position in 2006 to the 16th position worldwide in 2014. This is mainly due to Tangier-Med Port and all the big logistic companies that are now established in Morocco.
Additionally, a new generation of industrial parks continues to be developed. One of the pillars of development in the “Plan Emergence” (launched by Morocco in 2009) was to set up 22 industrial integrated platforms meeting world class quality standards.
These industrial parks offer a wide range of services, from general operations such as maintenance, security, telecom, catering, banking, health services, and business centers to advanced services such as logistics, recruitment services, and recycling.
Companies wishing to invest have the choice of renting, buying real estate and buildings or getting customized facilities. Some of these industrial parks are free zones while others are intended for specific activities such as the automotive industry. Logistics advantages include optimal connectivity to major ports, airports and highways. There are one stop shops among these platforms which facilitate preliminary operations. Last, but not least, automotive companies established in free trade zones benefit from incentives ranging from complete exemption from corporate tax for the first five years, followed by a rate of 8.75% for the following 20 years; VAT exemption both on imports and exports; no taxes on dividends; no restriction in capital repatriation and convertibility; free transactions in foreign currencies and simplified custom procedures. These free zones also offer training programs with specialized training institutes financed by the government and managed by the private sector.
One of the contributing factors to Morocco’s success is a working partnership between government and the private sector. The kingdom’s industrial strategies are developed through close cooperation between the government and the private sector. The objectives and the means to reach them are determined – in part – by the feedback from the economic operators. A good illustration of this cooperation is the training institutes launched over the last few years to meet business needs in the priority industrial sectors. These institutes are financed by the state and operated by the private sector. In the case of the automotive sector, there are already three institutes operational and covering different regions of the kingdom. In addition, the Automotive Professional Association has identified gaps in the Moroccan value chain. This analysis allows the Ministry of Industry and our agency – Invest in Morocco – to focus its promotion and prospecting efforts on the foreign companies active in these missing sub-activities in order to develop the full value chain of the Moroccan automotive sector.
Other OEMs are expected to build on Renault’s success in establishing a manufacturing presence. The Moroccan Investment Development Agency (AMDI) has confirmed to Automotive Industries that it is in discussions with “certain car manufacturers and things are moving well”. AMDI says it too early to give more details, but confirms that attracting a second car manufacturer is a high national priority. In addition to the establishment of a second major international manufacturer, big players are interested in sourcing from Morocco to serve facilities in the south of Europe. The potential market is estimated at 1.4 billion Euros. AMDI is also looking at co-production potential with Asian manufacturers to serve the growing African market. The development agency says it is confident that in the coming years, the automotive sector will become a growth engine for other branches of industry.
Morocco’s post-2015 investment strategy is called “The industrial acceleration plan – performing ecosystems”. Running from 2014-2020, it includes a second industrial development phase. The changes to be introduced will help diversify, expand the industrial fabric and institute a better coordination and deeper partnership between large companies and SMEs.
These objectives were agreed with the private sector and specific measures are being taken to ensure successful businesses and a strong sustainable growth. A total of US$2.5 billion is dedicated to financing projects over the next seven years and 1000ha of land for rent will be available to accompany this strategy.
As far as the automotive industry is concerned, four pilot ecosystems were launched in October 2014 with the objectives of creating over 56,000 jobs and increasing exports by more than 24 billion MAD (US$2,5 billion). Sectors include wiring, metal stamping, interiors, seats and car batteries. The strategy supports smaller firms (Tier 3) by providing financial support of up to 30% of the total amount of the investment. The focus is on molding, cataphoresis, tooling, surface treatment, plastic injection, connector suppliers, and precision mechanical parts suppliers. In addition, specific training courses will be put in place in coordination with the private sector. A Centre for Studies, Testing & Development (CEED) funded by the Ministry in charge of Industry, will be established with delegated management to AMICA (automotive association) and sponsored by companies. Finally, a structure will be created within AMICA to manage the implementation of the automotive ecosystems.