Saudi car industry? — Work on supply chain

Few Arab countries have the political stability and free-market economies that would attract car manufacturers.
Saudi Arabia is one of those markets.
In order to attract carmakers to locate some assembly or engine plants in the Kingdom, a supply chain of parts and services should be in place as a pre-requisite.
This is the experience of Renault in Morocco, another stable Arab country with a good labor force. Renault is considering building engines in Morocco in its drive to cut costs.
The company already has capacity to build 400,000 vehicles at plants in Tangier and Casablanca.
The only obstacle that is stalling the project is lack of adequate supply chain.
A company official confirms that that Renault is “thinking about the engine plant in Morocco but first needs a stronger supply chain on the ground.”
The company builds the Dacia Sandero hatchback in Morocco and intends to shift more production there from the brand’s home in Romania, where workers’ unions are demanding higher wages. Renault has another engine plant in Spain.
More production is likely to shift to emerging markets in order to cut costs and countries that are ready with the best supply chains and infrastructures stand to gain from the new drive of auto industry globalization.
The question of how to build a supply chain is a function of the general investment environment and incentives to small businesses.
Companies that serve the industry by producing spare parts locally can also serve assembly plants by supplying those parts in bulk and in quality high enough to satisfy international standards.
Nurturing small companies and preparing the local markets for offering manufacturing facilities at lower costs would attract attention from global car companies seeking to expand and control costs. The formula is clear but it needs planning and incentives.
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Adel Murad is a senior motoring and business journalist, based in London.
Email: [email protected]