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Morocco takes lead in car manufacturing attractiveness for MENA region

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A recent study by Fitch Solutions has ranked Morocco as the most attractive market for car production within the Middle East and North Africa (MENA) region. Morocco scored 57.6, placing it ahead of Iran (58.4), Egypt (63.0), and then Algeria (63.2).

This ranking comes despite an overall riskier environment in the MENA area compared to the global average.

Morocco’s position as a gateway to the US and EU markets, coupled with its developing electric vehicle (EV) industry, makes it a highly attractive proposition for long-term investors. 

While Morocco’s economic risk scores (80.4 and 78.6 for short-term and long-term, respectively) might pose hurdles for some, the Red Sea Crisis has arguably increased risk tolerance for investments in automotive manufacturing.

According to Fitch Solutions, Morocco’s appeal for carmakers stems from its strategic location, established industrial base, and openness to new investors. 

The study acknowledges that the Moroccan market’s reliance on European markets in the short-term slightly weakens its score, but expects diversification efforts to mitigate this risk over time.

The Fitch Solutions Autos Production Risk/Reward Index (RRI) scored the MENA region at an average of 60.6 out of 100 (with lower scores indicating a more attractive market). This is higher than Sub-Saharan Africa (SSA) but falls behind the global average of 50.0. 

The study highlights political risk as a major concern for the MENA region, with an average score of 67.9 (higher score signifies higher risk). This is largely due to ongoing conflicts like the Red Sea Crisis and tensions in the Middle East. 

These factors also contribute to higher economic risks, reflected in the region’s scores of 79.7 and 83.0 for short-term and long-term economic risks, respectively.

The MENA region boasts strong potential for growth in car manufacturing, as suggested by its RRI “Rewards” pillar surpassing the “Risks” pillar. 

This potential is further emphasized by the region’s score of 32.6 (lower score is better) in the “vehicle production growth” category. 

While this indicates room for expansion, it’s important to note that the region’s car production volumes remain relatively low due to its nascent automotive industry.

Despite the region’s overall higher risk profile, the MENA market generally offers a balance of higher rewards with the elevated risks. Notably, no MENA country falls into the “High Risk/Low Reward” category. 

While Iran and Algeria boast high potential rewards, they also come with high risks. On the other hand, both Egypt and Morocco fall into the “Low Risk/Low Reward” quadrant.

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