Renault to Build Auto Assembly Plant in Algeria

PARIS — Renault will sign a deal with Algeria on Wednesday to build an assembly plant near the city of Oran, giving the French automaker wider access to one of the world’s hottest car markets and a chance to further diversify beyond Europe.

The automaker will sign the pact, three years in the making, on the first day of a state visit by President François Hollande, Rochelle Chimenes, a Renault spokeswoman, said Tuesday. That will pave the way for the construction of a factory to build Renault and Dacia model cars to service a market that grew by 50 percent in the year through October.

Mr. Hollande is embarking on a two-day visit to smooth France’s tricky relations with Algeria and and expand economic ties with the petroleum-rich north African country of 37 million people. Algeria, administered as a department of France during the colonial era, won its independence in 1962 after a bloody war. France is nonetheless Algeria’s largest trading partner.

Mr. Hollande, accompanied by a legion of French government and business leaders, is scheduled to meet with his Algerian counterpart, Abdelaziz Bouteflika, and to address a joint session of the country’s Parliament.

Algeria — the second-largest car market in Africa after South Africa — is eager to reduce its dependence on the petroleum sector, which accounts for about one third of its economy. But restrictions on foreign investment enacted after the financial crisis, along with a failure to modernize the banking system, continue to hold back Algeria’s economic development, according to the U.S. State Department.

Oliver Masetti, an economist at Deutsche Bank, estimates that, depending on the oil price, the Algerian economy will grow by up to 2.6 percent this year and as much as 3.4 percent in 2013 — modest, by developing world standards.

Renault controls about 27 percent of the Algerian market, and its sales have soared about 57 percent there this year. Its Clio supermini car is the country’s best-selling model. Renault this year opened a factory in Tangier, Morocco, to make cars for export to the European and Mediterranean markets.

Renault is better diversified on a global basis than its ailing French rival, PSA Peugeot Citroën, partly thanks to its alliance with Nissan Motor. But it is looking for growth outside the European Union, which is gripped by recession and faces the possibility that budget austerity will mean years of stagnation.

La Tribune, a French financial daily newspaper, reported Tuesday that Mr. Hollande would raise with his hosts the possibility that the Algerian government might dip into its $200 billion of foreign reserves to take a stake in Peugeot, which is undergoing a painful restructuring to stay afloat. Any such request will likely fall on deaf ears, the newspaper cited an unidentified Algerian official as saying.

Cécile Damide, a spokeswoman for PSA Peugeot Citroën, declined to comment.

Sales of new cars in the 27-nation region fell 7.6 percent in the first 11 months of 2012 from the same period a year earlier, according to the European Automobile Manufacturers’ Association. Sales declined in every major market except Britain, bringing absolute sales to a level last seen in 1993.

The Algerian government will hold 51 percent of the new factory, with Renault holding the rest, the French daily newspaper Le Figaro reported Tuesday, without identifying its source. The company declined to comment on the details, but such an arrangement would be consistent with the standard foreign investment contract in Algeria. Le Figaro also said the plant would begin operation in 2014 with annual production of about 25,000 vehicles, which could grow to 75,000.

Article source: http://www.nytimes.com/2012/12/19/business/global/renault-to-build-auto-assembly-plant-in-algeria.html?partner=rss&emc=rss