Peugeot to build a new factory in Morocco

Peugeot Morocco - Gilbert Sopakuwa - FlickrMorocco is becoming a favoured investment destination for auto companies. (Image source: Gilbert Sopakuwa/FlickrPSA Peugeot Citroen has announced that it is going to set up a new assembly plant in Morocco at the cost of US$630mn

The move is part of an effort by the French car maker to cut production costs as well as to reduce its dependence on European markets. The site near the coastal city of Kenitra will assemble small and subcompact cars that will be marketed in countries in Africa and the Middle East. Production is set to start in 2019 and the factory will have an initial capacity of 90,000 vehicles, set to go up to 200,000 vehicles as sales improve.

Commenting on this expansion into emerging markets and the focus on lower-cost vehicles, Carlos Tavares, CEO at Peugeot, said, “Africa and the Middle East are historic markets for PSA and the region is expected to become a profitable driver of our internationalisation.” He added that he is targeting 1mn annual vehicle sales in the Middle East and Africa by 2025.

Peugeot said it expects the plant to source 60 per cent of components locally, rising to 80 per cent as the supply chain develops. It will have a 4,500-strong workforce once the plant reaches its full 200,000-vehicle capacity. The models built in Morocco are likely to replace the Peugeot 301 and Citroen C-Elysee sedans assembled in Vigo, Spain, for many of the same markets including Turkey and North Africa. They will be built on a new low-cost vehicle architecture developed by its joint venture with China’s Dongfeng.

The development is also a sign of Morocco’s growing status as an industrial investment destination in Africa. Peugeot has already outsourced some engineering functions to a Moroccan research and development centre run by Altran Technologies.

Last month, USA’s Ford Motor Company had also announced expansion of its operations in Morocco.

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