The automotive sector in Morocco has witnessed a boom in the last 10 years, making the country Africa’s automotive industry hub, both in terms of sales and new-vehicle production. Currently, Morocco is the second-largest automotive market in Africa with annual new-vehicle sales forecast to be north of 175,000 units by year-end 2018. The robust local market has grown more than 25% in the past two years, which does not include equally robust export sales.
Today, the Moroccan market has a total of almost 3 million private and utility vehicles in operation. Private vehicles make up the majority of vehicles in operation in Morocco. It is estimated that the business vehicle fleet market is comprised of almost 140,000 commercial vehicles in operation. The reason this is estimated is because there is no reliable public information as to the number of fleet vehicles in operation in the Kingdom of Morocco and its political subdivisions.
Short-term car rental, which includes cars and small vans, by both business and leisure travelers, is a major fleet segment in Morocco as tourism is a significant component of the economy. As with commercial fleet vehicles, there is no official data as to the size of the car-rental market.
“Despite the availability of detailed industry information breakdown to the model trim level, we still do not have offical information about fleet sales,” said Wisam ElBana, general manager - North Africa for General Motors. ElBana works at the regional marketing office for GM’s overseas operations representing the Chevrolet brand in Morocco, Tunisia, Algeria, and Libya.
The primary method of fleet vehicle acquisition is purchasing, but leasing is growing, especially among multinational companies operating in Morocco. Among the multinational fleet lessors operating in Morocco are ALD Automotive and Arval. Other local lessors in the fleet sector are Wafabail, Maroc Leasing, and Maghrebbail.
In addition to funding fleet acquisition with equity capital purchasing or leasing, both multinational and small to medium enterprises (SMEs) use long-term rentals when additional vehicles are temporarily needed to optimize their fleets.
Another employee transportation option is to offer personal allowances to employees to purchase their own vehicles to conduct company business.
Maintenance and repair of fleet vehicles in Morocco are performed by independent garages, with the average fleet vehicle visiting a repair shop at least four times per year primarily due to the higher wear and tear caused by the poor quality of the road infrastructure.
Strong Automotive Market
Morocco has had three back-to-back record sales years and calendar-year 2018 is shaping up to be the fourth consecutive record year. For instance, during the first seven months of 2018, the Moroccan automotive market has experienced a notable increase in its sales. According to monthly statistics published by the Association of Importers of Vehicles in Morocco (AIVAM), 104,678 vehicles were sold by the end of July 2018 compared to 99,831 vehicles sold in the same period in 2017, up by 4.86%. During January-July 2018, sales of imported vehicles increased to 89,152 units, up by 5.21% and locally manufactured vehicle sales increased to 15,526 units, up by 2.87%.
As for light commercial vehicles (LCVs), statistics showed 7,870 units were sold from January-July 2018 against 7,401 vehicles sold over the same period in 2017.
The preceding record year, CY-2017, saw 169,000 vehicles sold in Morocco. The automotive market in 2017 grew more than 25% over calendar-year 2016. According to AIVAM, the 2017 record volume was comprised of 152,324 passenger cars and 10,786 light commercial vehicles.
Similarly, new-vehicle sales in Morocco achieved record sales in 2016 with more than 163,110 new registrations, 30,000 more than in 2015, which was the prior record year. Despite a difficult 2015-2016 agricultural season exacerbated by droughts, commercial vehicles were able to maintain sales above the symbolic threshold of 10,000 units, the benchmark used in Morocco to denote a healthy commercial sales environment.
The long-time dominant auto manufacturer in Morocco is Renault. According to AVIAM statistics, year-to-date in 2018, Dacia, a Renault brand, sold the most cars with 30,450 units, up by 4.28%, followed by Renault with 15,094 units, up by 18.32%. Both brands are marketed by Renault Maroc, which also operates two assembly sites – one in Tangiers and the other in Casablanca.
The third and fourth top-selling vehicles for 2018, respectively, were Volkswagen with 7,027 units, up by 5.48%, and Hyundai with 6,948 units, up by 1%. Fiat is ranked fifth with 5,912 units sold, up by 17.75%. Ford ranks 6th place with 5,885 vehicles sold, followed by Peugeot with 5,876, Nissan with 4,114, Toyota with 3,760, and Citroen with 1,556.
As for luxury cars, the German OEMs maintained their leading position, selling 1,778 Mercedes-Benz units by July 2018 against 1,740 units a year earlier. BMW is second with 1,740 vehicles sold, followed by 1,566 vehicles sold from Audi.
Overall, 84% of the fleet vehicles in Morocco consists of European brands. Renault, Peugeot, Citroën, along with BMW, Mercedes, and Audi are the most popular among companies, particularly with senior managers. Japanese and Korean brands are competitors, especially in the utility and 4x4 segments.
“Morocco is a European-centric market. After Opel was sold to PSA, General Motors is reviving the Chevrolet brand” said ElBana. “We’re starting by building up a product portfolio that suits the market preferences. We recently introduced the Equinox in Morocco. We’re focusing on rebuilding our product portfolio starting with the Equinox by focusing on models made in the USA to leverage the customs and homologation benefits under the free trade agreement between Morocco and the United States.”
According to ElBana, the newly introduced Chevrolet Equinox complies with European emission standards, with some modifications. Morocco adheres to Euro 6 emission standards.
“GM’s performance in Morocco will depend on getting the release of additional products with small high-performance diesel engines into the country,” said ElBana.
Most of the North African countries, except Egypt and Libya, were French colonies or protectorates, with most government and business tractions conducted in French, closely linking Moroccan culture to France. These deep historical ties have engendered Moroccan consumers to prefer French automotive brands. This is one reason why Renault and Peugeot dominate the local market. However, continued domination of the Moroccan automotive market by French OEMs has come under a serious challenge from Asian manufacturers.
“The high penetration of Asian cars could soon threaten the dominance of French brands which still represent 40% of the market in Morocco,” said Abderrahim Benkirane, president of AIVAM, in an interview with the Le Matin daily.
“The breakthrough by Asian car manufacturers, mainly Japanese and Korean, is progressing strongly and in four to five years, they are also set to be joined by the Chinese who are showing great signs of improvement,” added the AIVAM president.
The Used-Vehicle Market
At one time, Morocco had a thriving used-vehicle market from the importation of used European vehicles, many of which were exported off-lease fleet vehicles. But the country stopped importing used vehicles because the less expensive used vehicles from Europe were diverting sales from dealers selling new vehicles. Another reason cited by the government to curb used-vehicle importation was to reduce emissions emitted by these older vehicles.
Most dealers in Morocco do not sell used vehicles, which, instead are primarily sold by private repair shops and individuals. The secondary used-vehicle business in Morocco is funded informally by garage owners using it as a supplemental revenue stream focused on resale value speculation. At the top end of the used-vehicle market, high-end vehicles, primarily long-term rental vehicles, have increased their availability in the second-hand automotive market.
State of the Moroccan Economy
The government of Morocco positions itself as a gateway to the emerging markets of French-speaking Africa and other Arab countries, as well as an export platform to Europe.
Unlike many countries in the North Africa region, Morocco managed to avoid a decline in foreign direct investments following the global financial crisis of 2007-2008 and the Arab Spring uprisings of 2010-2011, partly by marketing itself as an export base to Europe, the Middle East, and Africa.
Morocco overtook Egypt in 2012 as the leading automaker in North Africa, currently ranked second in Africa behind South Africa. Due to its strategic geographic location and proximity to Europe, the Middle East, and sub-Saharan African countries, Morocco has become a desirable location for automotive OEMs to establish vehicle assembly plants. These OEMs are looking to take advantage of Morocco’s strategic geographic position, its competitive labor market, and political stability. In addition to automotive OEMs, Morocco has also successfully attracted a number of major Tier One automotive component suppliers in recent years, including Delphi, Bombardier, and Eaton Corp.
Another attraction for these companies is that Morocco has a free trade agreements (FTA) with Europe and the U.S.
Morocco’s low-cost labor force is a key factor in enticing international automotive manufacturers to enter the market with the lure to reduce production costs thereby increasing profit margins. Automotive wages in Morocco are 73% lower than those in nearby Spain.
Foreign investment in the country is encouraged by the Moroccan government through the creation of special trade zones that exempt companies from corporate taxes in the first five years that are followed by an attractive low tax rate of 8.75% over the next 20 years.
Expansion of Auto Market
Renault currently has two factories producing fully assembled cars in the kingdom. It will be joined by PSA Peugeot Citroen, which announced in June 2018 that it will build a greenfield assembly plant in the port city of Kenitra, near the capital, Rabat. Production will commence in spring 2019 with an initial annual output of 90,000 units. The plant will have a capacity to eventually build 200,000 B- and C-segment vehicles, plus 200,000 engines annually, of which, 85% will be earmarked for export with the balance sold in the local market.
In other news, Opel announced in January 2018 that it will export cars to Morocco from its European plants. The Auto Hall Group, via its subsidiary Societe Marocaine de l’Automobile Allemande (SM2A), began importing and selling Opel vehicles in Morocco in April 2018. The Auto Hall Group is one of the largest car dealers in the Morocco with a network of more than 50 sales outlets. Opel vehicles will be sold at 10 exclusive outlets. By 2023, Opel’s goal to have a 5% market share in Morocco.
GM is focused on expanding its sales in North Africa. GM has one Chevrolet dealer in Morocco – CFAO Motors Maroc (CMM). Previously, almost all GM sales in Morocco were Opel models, which at the time was owned by GM.
ElBana does not work directly with local fleets. The dealer is the only authorized entity in the chain to communicate with the fleets. “This office is a marketing office. All the sales are done through dealers,” said ElBana. As a result, all GM sales go directly through the GM dealer and the dealer sells and leases the vehicles to individual fleet customers.
“Fleet deals are normally with car-rental operators and distribution/cargo companies. The preferred segments for car-rental companies are B- and C-size cars, while B- and D-size vans are the preferred segment for distribution companies,” said ElBana.
A new entry in the Morocco automotive market is Chinese OEM BYD, which will open a factory in Morocco to build battery-powered cars, buses, trucks, and batteries. The factory is located in Mohamed VI Tangier Tech City, which is being promoted as the North African Silicon Valley.
The automotive industry in Morocco, as a whole, accounts for 16% of the country’s gross domestic product (GDP), and is projected to jump to 20% once Peugeot starts production in 2019.
Morocco’s auto industry has already surpassed traditional Moroccan export leaders, such as agriculture and phosphates. For instance, at the end of September 2017, total exports from Morocco rose 6.2% from the year prior to 160.07 billion dirhams, led by 35 billion dirhams of auto exports compared to 34 billion for phosphate sales and 31 billion of agricultural products. Historically, phosphate sales and agricultural products were the top two exports from Morocco.
Road Safety Needs Improvement
Traffic accidents are a significant hazard in Morocco due to poor driving practices that show a serious disrespect of traffic laws, a disregard of stop signs and traffic signals, and a country where a large segment of the population that does not wear seatbelts.
According to the latest available data, traffic accidents rose to 81,827 in 2016, compared to 78,864 a year earlier. The Ministry of Equipment Transport and Logistics, says the three main factors for traffic accidents are poor road infrastructure, poorly maintained vehicles, and human error by both drivers and pedestrians.
Congested streets are characteristic of urban driving in Morocco. Traffic signals do not always function and are sometimes difficult to see. Employees working for multinational companies are cautioned to exercise extreme caution when driving at night due to poor lighting systems along roads. This is particularly true at dusk during the Islamic holy month of Ramadan, when adherence to traffic regulations is lax, and from July to September when Moroccans resident abroad return from Europe by car in large numbers.
Secondary routes in rural areas are often narrow and poorly paved. Pedestrians, scooters, and animal-drawn carts are common on all roadways, including the freeways, and driving at night in rural areas should be avoided, if possible. During the rainy season (November-March) flash flooding is frequent and sometimes severe, washing away roads and vehicles in rural areas. Often Moroccan police officers pull over drivers for inspection within the city and on highways. Confiscation of a driver’s license is possible if a violator is unable or unwilling to settle a fine at the time of a traffic stop.