Renault says could triple production at new Algeria plant

Algeria (Reuters) – French carmaker Renault opened its first plant in Algeria on Monday at a cost of 50 million euros ($62 million) to boost its presence in Africa’s second-biggest auto market.

The group set an initial production target of 25,000 vehicles a year that could triple by 2019 for the factory in Oued Tlelat, in the Oran region, which will produce the new Renault Symbol model.

“A second phase with an increase to 75,000 vehicles per year is under consideration and will include closer integration of suppliers, as well as body and paint shops,” Renault said in a statement following the plant’s inauguration.

Algeria is Renault’s tenth-largest market, where it is the biggest carmaker with a 25.5 percent share, according to the group. Renault makes almost half of its sales outside Europe.

Some 425,000 vehicles were sold in the country in 2013, making it the continent’s second-largest automotive market behind South Africa. The market has contracted in 2014 with just over 265,000 vehicle sales through September, but its potential remains high, Renault says, because the 3 million vehicles currently on the country’s roads are on average 16 years old.

“In the medium term, I think it’s a market that can exceed 500,000 units a year,” Guillaume Josselin, Renault’s sales chief in Algeria, said during a conference call.

Renault’s low-cost cars and emerging market presence helped it ride out a six-year European auto slump that ended last year. But the company is now facing weakening currencies and demand in many of the same overseas markets.

It sees further growth potential in Algeria, however, where 70 percent of the cars on the road are more than 10 years old and the ownership rate is 100 vehicles per 1,000 inhabitants, compared with 500 in western Europe.

Renault said it will hold 49 percent in the new factory, and has hired close to 350 staff. Algeria’s Societe Nationale des Vehicules Industriels will own 34 percent and the Algerian National Investment Fund 17 percent.