Market Report, "Morocco Autos Report Q2 2014", published

From: Fast Market Research, Inc.
Published: Tue Mar 25 2014

Morocco's highly competitive production environment, government support towards manufacturing and its proximity to the high-volume European markets and high-growth potential African markets remain the main attractions for carmakers seeking production-related investments in the country. BMI accordingly sees production in Morocco rising considerably over our newly extended five-year forecast period, with a total completely built unit production of 155,074 in 2018. Our forecast for 2014 calls for 124,480 vehicles to be produced over the year, marking a 5.2% increase on 2013.

However, the sales outlook is not as compelling. New vehicle sales in Morocco fell by 7.3% year-on-year (y-o-y) in 2013, to 120,766 units, according to figures from Morocco's Association of Vehicle Importers (AIVAM) as cited by the local Le Matin newspaper in January 2014. Breaking down the headline figure, there were 108,188 passenger cars sold in Morocco over 2013, down by 8.2%. However, light commercial vehicles saw a slight (+0.72%) increase in sales, to reach 12,578 units.

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The fall in new vehicle sales came as a surprise to many auto industry analysts, who had expected further growth in new vehicle sales over the past 12 months, following the stellar growth seen in 2012. However, the industry fell victim to the worsening near-term economic outlook for Morocco, with BMI believing that 2014 may again prove a difficult year for new car sales. Our Country Risk team is forecasting real GDP growth of 2.8% this year, down from an estimated 4.4% in 2013, reflecting weak primary sector growth and restrained domestic demand.

Looking forward, the macroeconomic outlook looks set to remain clouded. The performance of the nonagricultural sector is likely to remain subdued for a second consecutive year in 2014, as a heavier tax burden and the phasing out of government energy subsidies place pressure on domestic demand. Growth in the primary sector will also be constrained by the scale of last year's agricultural recovery, with 2013 cereal production officially estimated to have ended 30% above the five-year average.

In particular, private consumption - a key indicator of likely future demand for new vehicles - looks set to remain depressed in 2014, with BMI projecting real growth of just 2.2%, the lowest levels since 2010. Higher value-added tax rates set to take effect on products such as salt, margarine, and airplane tickets could discourage consumption. Most importantly, the government's decision on January 17 to end subsidies of fuel oil and gasoline, and to gradually phase out subsidies for diesel, will contribute to higher inflation and deal a blow to disposable incomes.

The positives for the economy are that we expect a moderate recovery in exports and the key tourism sector in 2014, with the latter potentially set to act as a support for new vehicle sales, as car rental firms look to modernise their fleets.

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