Yazaki and other Japanese auto suppliers are setting up production bases in North Africa. This move helps them diversify their supply chains amid increasing geopolitical risks in Eastern Europe. This is particularly due to the Ukraine war. They are focusing on how these changes affect the supply of key auto parts.
Wire harness supplier Yazaki will pour 9 billion yen ($69 million) to raise output at its Morocco plants by around 25%. The company will spend 5 billion of the fresh investment on building a new production facility in Meknes, in the north of Morocco. Yazaki will start construction of the Meknes facility this year. Moreover, a new one in Egypt will start in 2023. The company will also increase capacity at its existing plants in Tangier and Kenitra.
Auto Parts Demand
Yazaki sees Morocco as a key supply base to European markets. The demand for its products, including essential auto parts, is rising there. It has plants in Bulgaria and the Czech Republic. But geopolitical risks are escalating due to Russia’s invasion of Ukraine.
Other wire harness suppliers are making the same moves. Fujikura plans to begin production in Morocco after shifting its operations from Ukraine. Sumitomo Electric Industries is also ramping up output in Morocco this year as it begins its move away from Ukraine.
Also Read: Aptiv Automotive to shift its Ukraine Production to Morocco
Production
Kasai Kogyo, an automotive interior parts supplier, also aims to start producing sun visors and other parts in Morocco within the year. These will be for export to Europe. This underscores the significance of Morocco as a hub for auto parts manufacturing.
Morocco is attractive because of its proximity to Europe and its close trade ties with the continent. Thanks to free-trade agreements with the EU, Moroccan exports to the bloc are exempt from tax. According to the Japan External Trade Organization, 250 auto-related companies operate facilities there.
Western auto suppliers have also set up factories in Morocco. Renault and Stellantis already have production bases there. Meanwhile, U.S. auto parts supplier Lear Corp., Germany-based Stahlschmidt, and Swiss-based TE Connectivity have announced plans to set up new plants in the country. These actions solidify the region’s status in the auto parts industry.
The Investment
The three companies are expected to invest the majority of their 8 billion yen combined funds in Tangier. Tangier is a port city in the north of Morocco. Chinese companies, including CITIC and Chongqing Polycomp International Corp., are also investing in facilities in Morocco.
Also Read: Morocco to produce up to 1 Million vehicles per year by 2030
In 2021, Morocco produced 400,000 vehicles, making it the second-biggest car-producing country in Africa after South Africa. Companies not only hope to use Morocco as an export base to Europe but also to its neighboring countries. Key auto parts play a critical role in this production landscape.
Apart from Morocco, Egypt is also attracting investment from the auto industry. Japanese machine tool maker DMG Mori will set up a plant in Egypt to start producing lathe and other products in 2023. It will be the first Japanese machine tool maker to build a production base in North Africa with a focus on expanding auto parts manufacturing capabilities.
The war in Ukraine and supply chain disruptions are hitting automakers. Germany’s Verband der Automobilindustrie, or VDA, in March announced that the industry expects even tighter supply of auto parts due to the Ukraine crisis.
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