Morocco overtakes Asian giants as top vehicle exporter to EU

From the newsletter

According to 2023 data from Morocco's Foreign Exchange Office, the country has now surpassed global giants like China and Japan to become the EU's leading vehicle exporter. This growth is attributed to the country's favourable policies that attracted major global OEMs like Renault and Stellantis. Morocco is now setting its sights on EV manufacturing.

• The country's automotive exports to the EU surged to €15.1 billion in 2023, a 30% increase from the previous year.

• It is on track to produce 1 million vehicles in 2025, with about 80% destined for export, mainly in the EU region.

More details

• Morocco's automotive industry has experienced significant growth since its inception in the 1960s. Initially, the local producer Société Marocaine de Constructions Automobiles (SOMACA) was the only assembler.

• However, as demand for export markets grew, the need for increased production capacity became evident. 

• To incentivise expansion, the government offered subsidies of up to 35% for manufacturers to establish factories in the rural hinterlands outside of Tangier. 

• As a result, it attracted major manufacturers like Renault, the largest OEM in Morocco, producing over 400,000 vehicles annually, followed by Stellantis. At the same time over 250 major international manufacturing companies operate in Morocco.

• This growth has led the sector to employ about 220,000 people, producing over 700,000 vehicles annually and contributing approximately 22% to Morocco's GDP. 

• Nearly 80% of these finished vehicles are exported, primarily to the EU, with Spain, France, Turkey, Germany, and Italy as the main markets. 

• Morocco's proximity to Europe (about 14 km) and its well-developed port infrastructure make it an ideal location for exporting vehicles and components. 

• However, the market is not without competition. Morocco's neighbours, like Egypt, are partnering with Chinese EV manufacturers to establish local manufacturing plants.

• Tunisia is also attracting investment in auto parts manufacturing and has potential for growth, with collaborations with Renault and some Chinese companies. 

• In the south, South Africa is a major competitor and has announced subsidies and incentives to support local EV manufacturing.

• Morocco is also focused on expanding its EV manufacturing capabilities. The country targets that EVs will account for about 60% of its exports by 2030, ahead of the EU's 2035 fossil fuel car ban. 

• Morocco's Stellantis has invested approximately $326 million in its Kenitra factory, with plans to double its production capacity from 200,000 to 400,000 vehicles annually. EVs will make up 50,000 of this increased production.

• Renault also targets to produce about 120,000 EVs of its main product, the Dacia Jogger, by the end of this year.

Our take

• Looking ahead, Morocco faces potential challenges. The focus of countries in Europe and the United States on localising their EV production could negatively affect Morocco, which is trying to position itself as a key player in the global EV supply chain. This shift could reduce demand for imported cars, potentially impacting Morocco's export market.

• These countries are also providing tax credits and incentives for locally-produced EVs, which are likely to reduce demand for Morocco's exports. Consumers in these markets will be more inclined to purchase domestically-produced EVs to take advantage of the incentives, making Moroccan-made EVs less competitive.

• To compete effectively in the global EV market, Morocco needs to develop vehicles that can rival established players. Partnering with key players in China, who possess more mature EV technology, could help reduce production costs and ensure price competitiveness.

• Morocco could also look to the African market, which is more reliant on imports. Being a party to the AfCFTA, Morocco can readily help fill the demand for EVs in Africa.