Peugeot Plans $632 Million Morocco Car Plant in Africa Push

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PSA Peugeot Citroen, which is striving to reduce reliance on Europe by boosting car sales in emerging markets, plans its first direct investment in Africa with an assembly plant in Morocco scheduled to start production in 2019.

The new factory near the city of Kenitra will start with capacity to build 90,000 vehicles a year, according to a contract signed Friday by Chief Executive Officer Carlos Tavares and Industry Minister Moulay Hafid Elalamy in Rabat, the capital. The carmaker will be responsible for the bulk of the 557 million euros ($628 million) in investments, Jean-Christophe Quemard, head of Peugeot’s African operations, told reporters.

The Kenitra project is Paris-based Peugeot’s first manufacturing investment under Tavares’s watch, and confirms his intentions to leverage the benefits of a reorganization that included a stake sale to Chinese manufacturer Dongfeng Motor Corp. last year and the disposal of the French company’s auto-loan unit. The plant, about 47 kilometers (30 miles) north of Rabat, will be Peugeot’s first wholly owned site in Africa.

“Africa and the Middle East are historic markets for PSA, and this region must become a profitable internationalization driver” of Peugeot’s turnaround, Tavares said at a press conference after the signing. The project “will provide us with centrally located production capacity for helping achieve our ambition to sell 1 million vehicles in 2025 in the region.”

Renault’s Strategy

Tavares, who left Renault SA to become CEO of Peugeot more than a year ago, is following the strategy of his former boss, Carlos Ghosn, who pushed the French competitor into markets abroad. Renault already has plants in Morocco, in the cities of Tangier and Casablanca, as well as in Algeria.

Peugeot, Europe’s second-largest carmaker, signed an agreement last year for PAN Nigeria Ltd. to assemble the 301 under contract in Kaduna, with a possible addition of the larger 508 sedan and the 308 hatchback.

The French company said Friday that the Moroccan plant will complement the Nigerian partnership, as well as a project being negotiated with Iran, in its Africa-Middle East growth strategy. Tavares told reporters, without elaborating, that Peugeot is also in talks with Algerian authorities in an industrial project in the country.

The factory at Kenitra will make compacts and subcompacts as well as their engines, and it may be expanded to produce as many as 200,000 cars annually.

Peugeot’s sales in Africa and the Middle East dropped 25 percent last year to 169,400 vehicles and accounted for 5.8 percent of its worldwide deliveries. In the first five months of 2015, Peugeot’s new registrations in that market jumped 18 percent from a year earlier to 76,900 autos.

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