Morocco's recent unveiling of a new hydrogen car prototype developed by the native-owned car company Neo Motors should be seen as part of a two-pronged strategy: first, to continue to expand manufacturing and development of automobiles as a key part of the country's economy, and second, to adapt that sector and the wider economy to the growing global trend towards decarbonisation. This strategy will likely have positive dividends for Morocco and should ensure that the country will remain an attractive option for investment in its automobile industry in the future.
The Growth of Morocco's Automobile Industry
Unlike some other countries in the MENA region and the wider African continent, Morocco does not have significant reserves of fossil fuels that could enable it to pursue an ultimately unsustainable rentier state model in which revenue is largely generated by those resources and employment demand is generally met by creating more jobs in a bloated government bureaucracy. Instead, the government has sensibly sought to develop a competitive manufacturing sector.
In this regard, it has had considerable success in expanding the automobile industry, whose roots go back to 1959 with the founding of the Société Marocaine de Constructions Automobiles (SOMACA), which was privatised in 2003 and fully acquired by Renault in 2019. Rather than simply serving as a source of cheap local labour for multinational companies as has been the case in Egypt's comparatively lacklustre car manufacturing industry, Morocco has also sought to ensure that components of cars should be made locally. This ability to manufacture parts locally is facilitated by trade agreements that allow for trouble-free importation of raw materials. According to French-car company Renault, whose two production plants in Tangier and Casablanca produced 350,000 vehicles in 2022 (a 15.3% increase on 2021), 60% of the final productsare composed of locally produced parts.
Despite some disruption caused by the COVID-19 pandemic, the statistics continue to point to the growth in the automotive industry that has helped the country secure second place behind South Africa in the Africa Industrialisation Index and become the leading manufacturer in the automotive industry on the African continent since 2018. During the first nine months of 2022, Morocco's automotive industry exports reached $7.7 billion, representing an increase of 34.9% compared with the same period in 2021. Similarly, in the first three months of 2023, automotive industry exports reached $3.4 billion, an increase of 44% compared with the same period in 2022.
The significance of the automotive industry to the wider Moroccan economy and its continued growing importance are illustrated by its contribution to the country's GDP: in 2019, it accounted for 19% of GDP, and the projection is that this contribution is to increase to 24% of GDP by 2023. Likewise the overall value of the industry is projected to increase $4 billion in 2021 to $5.5 billion in 2027.
One of the most notable factors explaining the ongoing success and expansion of the automotive industry is government incentives for automakers, most notably in the existence of two automotive cities in Tangier and Kenitra that offer a five-year exemption from corporate tax for companies operating in them.
A Move Towards Decarbonisation
The growing sense of urgency to tackle and mitigate the problem of climate change has meant there is now pressure across the board for decarbonisation of various sectors, including power generation, manufacturing and transport. This is most apparent in European countries. For example, the UK is committed to banning the sale of new petrol and diesel-powered cars and vans after 2030, while a similar though slightly watered-down commitment has been enacted by the EU for 2035 and beyond.
While there is a question of whether these commitments will be properly realised, there is undoubtedly a trend of transition away from vehicles powered by internal combustion engines in European countries in particular and it has relevance for the future of Morocco's automobile industry, especially considering the EU's importance as Morocco's leading trade partner. In contrast, in African markets, including Morocco's domestic market, there is considerably less push in this direction of decarbonisation. For example, in South Africa- the leading African market for electric vehicles- there were only 6000 electric vehicles on the country's roads in 2020.
In recognition of the trend towards decarbonisation that is particularly strong in Europe, the country is aiming to increase its importance in the manufacturing of components of electric vehicles and electric vehicles themselves. As regards components, Morocco has sought to expand its role in global production of electric car batteries in light of its reserves of cobalt (estimated to be the world's 11th largest), which is an important component in the production of rechargeable batteries. Thus in June 2022, Renault signed a deal with Moroccan mining company Managemwhereby the latter will supply Renault with 5000 tonnes of cobalt sulphate annually for seven years, beginning in 2025.
As for the manufacture of electric vehicles, Morocco's industry and trade minister estimated in December 2022 that the current production capacity in the sector of electric vehicles ranges between 40,000 and 50,000 cars annually, while the aim is to increase that capacity to 120,000 vehicles within three years. Alongside these plans to increase electric vehicles and components manufacture are schemes to encourage greater electric vehicle use within Morocco. This includes, for example, a plan to install 2500 new charging stations over the next three years.
The recent unveiling of the Moroccan hydrogen vehicle prototype should be understood in light of the same driving forces of decarbonisation and a desire to maintain Africa's leading position in manufacture and development of automobiles. Although the global electric vehicles market is far larger than that of hydrogen, larger vehicles may need the latter as a proper alternative to batteries, and refuelling a hydrogen vehicle takes far less time than recharging an electric one. The hydrogen vehicle prototype, if successful, could lead to large-scale manufacture, domestic sale and export of hydrogen vehicles from Morocco to the rest of the world, while offering an attractive opportunity for investment to develop and manufacture other types of hydrogen vehicles inside Morocco.
Outlook
In general, the prospects for the continued flourishing, expansion and development of Morocco's automotive industry remain very positive and present an ideal opportunity for those interested in investment in 'post-carbon' and 'net-zero' industries with the development of electric and hydrogen-powered vehicles in particular, which will be of growing importance to Morocco's automotive industry as the European market accelerates the shift in the direction of decarbonisation.