Much of the drive behind Morocco’s development over the past decade has come from the automotive sector. As a key pillar of the country’s industrialisation, the sector was Morocco’s leading exporter in 2019, generating revenues of $10.5bn.
Central to the development of the industry has been the influx of foreign original equipment manufacturers (OEMs) and their suppliers. Renault broke ground on Africa’s largest car plant located in Tanger Med Zones (TMZ) in 2012, adding to its existing plant in Casablanca, and laying the foundations for inbound automotive investment.
“The installation of Renault in Tangier was followed by the arrival of its main suppliers, in order to take advantage of geographical proximity and the advantages and incentives of Moroccan industrial policy,” says Aziz Jaid, an economist in the North Africa office of the UN’s Economic Commission for Africa.
The Renault plant produced more than 400,000 vehicles in 2019, 90% of which were exported to 74 different markets.
Another major French OEM, PSA Group, has a factory in Kenitra, a city located 50km up the coast from Morocco’s capital, Rabat, which has added to the existing draw of the country to component manufacturers.
Out of the 170 Tier 1 and Tier 2 automotive suppliers based in Morocco, 90 are located in Tangier, including the likes of Japan-based Yazaki, Ireland-based Delphi Technologies and Germany-based Schlemmer.
“Morocco’s value proposition for the automotive industry has rapidly evolved over a short space of time, with the special economic zones offering favourable tax treatment and various other incentives, such as land and infrastructure,” says Alex Ash, a global director of location strategy and incentives at site selection consultancy Hickey and Associates.
US-based Lear Corporation, a leading manufacturer and distributor of automotive interior equipment with presence in 36 countries and operating in TMZ since 2001, opened a new plant covering 7 hectares in Tanger Automotive City in 2020. To assist the US company in employing its expected 3000 people on site, Morocco’s automotive training centre IFMIA, which has sites in Tangier, Casablanca and Kenitra, helps to prepare workers for their operations.
“IFMIA has played a central role in vocational training in the sector, to supply Renault and its suppliers with qualified personnel to international standards,” says Mr Jaid.
Auto part manufacturer Marelli gained similar assistance when setting up production lines for both shock absorbers and automotive lighting within TMZ. Serge Giannitrapani, the general manager of Marelli’s manufacturing facility in Tanger Automotive City, says that the company’s “presence in Morocco is aimed to support locally the industrial sites and the business expansion of key automotive customers that have made important investments in the region”.
He adds: “This is a very dynamic country, with significant industrial growth over the past few years within the automotive sector and, obviously, one essential condition for a company such as ours is the possibility to rely on important levels of business ensured by the presence of customers.”
Other auto component companies have set up to export from TMZ. South Korea-based Hands Corporation, a manufacturer of aluminium alloy wheels that has operations in China and Korea, invested €385m to set up a production facility in 2019.
Sun Choi, the general manager of Hand Corporation’s TMZ operations, says that Morocco stood out when the company assessed locations for expansion in 2017 due to its proximity to the European market, as it has customers in countries such as Czech Republic, Romania, Spain and France.
“It takes less than two weeks to ship to the whole of Europe from Morocco, reducing our logistics costs. Morocco had some of the most competitive labour costs amongst the countries we assessed,” clarifies Mr Choi.
On top of Morocco’s economic fundamentals, Mr Choi says that the combination of attractive incentives offered by the Moroccan government, and bilateral free trade agreements with 54 countries, was another draw. However, he concedes that despite this attractiveness there is room for improvement.
“Morocco is very well suited to labour-intensive operations, such as cable and wire harness manufacturing, but our operations use heavy machinery and it can sometimes be difficult to find after-services agencies to repair our machines,” Mr Choi adds.
While the presence of several multinational manufacturers has furthered the industrial development of northern Morocco, there are concerns about spillovers into the broader economy.
Of the 170 companies operating in the automotive industry, just seven are Moroccan-owned, and experts question the extent to which there has been integration of Moroccan companies into the national value chain of the sector.
“Learning and the transfer of knowledge from global players to Moroccan companies — whether technological, managerial, organisational or technical — should be at the heart of the country's industrial strategy,” says Mr Jaid.
“The government is called upon to intensify its support to companies with Moroccan capital to promote their learning and the sustainability of the sector,” he adds.
However, there have been improvements. Since Renault has set up operations in TMZ, the number of Tier 1 automotive suppliers within its ecosystem has more than tripled, rising from 26 to 76, and the French carmaker is on course to reach 65% of locally sourced parts by 2023.
Marc Nassif, the head of Renault’s Moroccan operations, says they have committed to go from about €500m local sourcing of parts to reach €1.5bn by 2023.
Flying to Tangier
In line with its established base of automotive companies, TMZ has also developed a value proposition for related industries, such as aerospace and electronics.
Several major aeronautics players have chosen TMZ, including UK-based Boeing and France-based Safran, which set up a joint venture to produce wiring products in 2016, and American–Irish domiciled multinational Eaton Corporation.
“When you look at engineering and technically qualified talent, there is crossover between the automotive and aeronautics industries. Morocco has leveraged the fact it has an industrial cluster in manufacturing,” says Mr Ash.
When including other industry heavyweights such as Daher Socata and Bombardier, Morocco’s aeronautics industry hosts more than 120 companies and employs more than 11,000 people, according to TMSA figures.
Morocco has attracted 47 inbound aerospace FDI projects, more than any other north African country, according to greenfield investment monitor fDi Markets.
As multinational manufacturers reassess their supply chains, following fragility highlighted by the coronavirus pandemic, TMZ and Morocco are well positioned for further investment.
The average wage of automotive workers in Morocco is more competitive than Egypt and several central and eastern European countries, including Slovakia, Romania and Poland, according to Fitch Solutions, an affiliate of the US-based ratings agency.
In a research note in April 2020, Fitch Solutions said that they expect north African countries, but especially Morocco and Egypt, to benefit from “restructuring efforts from 2021 onwards as automakers will be keen to cut their spending as much as possible in 2020 due to the weak demand for vehicles and costs from production disruptions caused by the Covid-19 pandemic”.
With the launch of the African continental free trade area at the beginning of 2021, TMZ could also increase its role in trade within the African continent.
Mr Nassif believes that TMZ “could be Tier 1” within African regional development, adding that Renault already uses Tanger Med port to bring cars from some European plants and dispatch them to Africa.
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.
The above story was corrected to reflect that Marelli is no longer a subsidiary of FCA Group.