Urgency to review the current Algerian industrial policy

There is, in view of the high number of tabled demands, an urgency to review the current Algerian industrial policy. It concerns all those car assembly plants. 

The automotive sector is experiencing restructuring, mergers and relocations of large groups, with high production capacities. In the face of all these global changes, what is the profitability threshold for all the Algerian car assembly mini-projects?

The national fleet is 8.4 million of vehicles in 2016, of which more than 65% are tourist vehicles according to the Ministry of Transport giving an average of 1 vehicle for 7 citizens in 2016 against 5.7 for 2015 and 4.75 for 2014. About 53% of this park has an average age of less than 10 years, while 37% are over 20 years old. More exactly according to the ONS, the official statistical body cited by the Algerian Press Service, the national fleet had 5,986,181 vehicles at end 2016, compared with 5,683,156 vehicles at end 2015, up 5.33%, corresponding to an increase of 303,025 units. According to the Ministry of Energy, by end of 2016, Algeria would use nearly 15 million tons of road fuels of which more than 350,000 tons of LPG. There are also several questions to which any coherent economic policy must respond in order to avoid the failure of many of the manufacturers who would have in the meantime reaped huge profits to the detriment of the Treasury. 

Car assembly plants set within global changes

So, what is the future when according to some analysts, the size of the Chinese car market, not to mention India, if one remains in the current consumption model, should be multiplied by ten. The experts from the International Monetary Fund (IMF) provided the picture of a World park of 2.9 billion passenger cars by 2050; this vision starting from the assumption of an increase in household income especially from emerging countries especially those with large populations such as Russia, India or China.

So about 77.83 million cars should have been sold in 2017, against 74.38 million in 2016 according to international estimates. Meanwhile, world production of cars in 2015 was 90.68 billion of which

  1. China: 24,503,326 vehicles (+ 3.3%), –
  2. United States: 12,100,095 vehicles (+ 3.8%), –
  3. Japan: 9,278,238 Vehicles (-5.1%), –
  4. Germany: 6,033,164 vehicles (+ 2.1%), –
  5. South Korea: 4,555,957 vehicles (+ 0.7%), –
  6. India: 4,125,744 vehicles (+ 7.3%), –
  7. Mexico: 3,565,469 vehicles (+ 5.9%), –
  8. Spain: 2,733,201 vehicles (+ 13.7%), –
  9. Brazil: 2,429,463 Vehicles (-22.8%), –
  10. Canada: 2,283,474 Vehicles (-4.6%), –
  11. France: 1,970,000 vehicles (+ 8.2%), –
  12. Thailand: 1,915,420 vehicles (+ 1.9%), –
  13. United Kingdom: 1,682,156 vehicles (+ 5.2%), –
  14. Russia: 1,384,399 Vehicles (-26.6%), –
  15. Turkey: 1,358,796 vehicles (+ 16.1%), –
  16. Czech Republic: 1,303,603 vehicles (+ 4.2%), –
  17. Indonesia: 1,098,780 Vehicles (-15.4%), –
  18. Italy: 1,014,223 vehicles (+ 45.3%), –
  19. Slovakia: 1,000,001 Vehicles (+ 3.0%),
  20. Iran: 982,337 vehicles (-9.9%).

So, the international constraints for Algeria are there. The situation of the global car market is evolving through being an oligopolistic market, depending on purchasing power, infrastructure and the possibility of substitution of other modes of transport, in particular the collective specific to each country according to its transport policy, having known since the crisis of October 2008 major upheavals, mergers succeeding takeovers and various equity acquisitions. Currently, the largest multinationals are General Motors despite its recent restructuring, closely followed by Volkswagen and Nissan, which since its alliance with the French manufacturer Renault, Chrysler, FIAT, Honda, Mitsubishi and Mazda share the limelight of the top six global manufacturers, all of which have a production capacity of over four million vehicles, accounting for 61 percent of the global automotive market, followed by South Korean Hyundai, Daewoo, Kia; Sang-Yang and Samsung have joined the ranks of independent builders, able to finance, design and produce their own vehicles and that European multinational companies are the most Important manufacturers of spare parts and the largest manufacturers of trucks, including Mercedes-Benz and Volvo. In the rest of the world, most car manufacturers are subsidiaries of American, Japanese and European manufacturers. In countries like Malaysia, China and India, production is managed by local companies, but always with the support of large foreign groups. We observe two opposite tendencies that are happening at the same time: The location of the production in certain geographical areas and on certain countries and the relocation; And for what is The location of world car production, it focuses on the Regional over three Areas: Europe, North America and Asia. In addition, on each of them the manufacturing is located on some Countries; In Europe, the main manufacturers are Germany, France, the United Kingdom and Italy, all belonging to the European Union. In North America, production is mainly concentrated on the United States, and in Asia it is in Japan and South Korea and for world exports of automobiles, the concentration is even higher, since it is limited Mainly in two areas : Europe and Asia. And that the near future with the loss of competitiveness of some countries for the benefit of some emerging countries (Russia, India, China, Brazil) we should witness the reorganization of world production of vehicles in relation to the levels of training of The size of the factories and with the research carried out by the motor companies and clearly, the factories which will maintain themselves on each country will be the most competitive, the priorities of the leaders of the car manufacturers being thus: technology and innovation with notably automation, especially in Japan, whose labor cost is about ten times higher than China’s, ethics and corporate governance, collaborative approach, best strategies for success, environment and globalization. Future technological prospects taking into account the new Ecological Challenge, (hybrid, electric cars) taking into account the new model of energy consumption which is slowly in place, the crisis of October 2008 foreshadowing important Strategic and economic upheavals, as China is on the move to become the world leader in Clean cars All categories thus taking advantage of the first plans “Greens” of the United States, Europe and Japan. In the short term, we are moving towards optimising the operation of petrol and diesel engines, with a reduction of 20/30% of the consumption, because for electric cars, the lithium resources for the famous lithium-ion batteries are Limited and that electric motors require magnets that are also manufactured with rare metals, a market of 70/80 million vehicles per year that cannot absorb large Volumes in electric cars and that for another ten years the engines Classics should remain in the majority. To make things even less amenable, the US will slap a tax on cars made on the continent if the European Union (EU) retaliates against its recently adopted tariffs on imports of steel and aluminium.

To be continued shortly.