Hyundai to build $400m car factory in Algeria

From the newsletter

South Korean company Hyundai Motor Group, the world’s third largest carmaker, is set to build a motor vehicle factory in Algeria. The factory, whose construction cost is estimated at $400 million and completion slated for 2026, will make both fuel and electric cars. Hyundai will build the factory in partnership with Omani group Saud Bahwan.  

• Hyundai makes a number of EVs, including the Ioniq 5, Ioniq 6, Kona Electric, and Tucson Plug-In Hybrid. These models are increasingly becoming popular in a number of markets in Africa where the carmaker has dealerships. Some of these EVs will be made at the Algeria factory.

• Algeria's automotive industry continues to grow, with Hyundai planning a significant return after exiting the market in 2020. The Hyundai plant is a significant development for the country, promising thousands of jobs and reinforcing its position as a key player in the African automotive industry.7

More details

• The $400 million investment will fund the construction of a plant producing a range of vehicles, from low-cost SUVs to electric models, aimed at both the local and African markets. The plant will produce vehicles designed to meet the demand for affordable cars, a move aligned with global energy trends, such as electric mobility.

• Production launch will begin in late 2026 with a low-cost SUV and a utility vehicle, a sedan and another utility vehicle scheduled for 2027, and a small city car in 2028. Algeria was chosen for its economic stability, its reforms attractive to foreign investment, and its strategic position in North Africa. 

• Hyundai’s entry into manufacturing of EVs in Algeria will increase competition in the budding sector. Chinese electric vehicle company SFE Electric Car Manufacturing Group is also racing to build an EV factory there. The factory's production capacity is expected to range between 50,000 and 200,000 electric cars annually. 

• Algeria is attracting increased interest from automakers seeking to take advantage of its cheap energy and proximity to Europe. Stellantis has a manufacturing plant in Tafraoui, where it produces Fiat models, including the Fiat 500 and Fiat Doblò. Renault also has a production plant in Oran, where it produces models like the Sandero. 

• For Hyundai, it will not be its first time to produce vehicles in Africa. The company has a joint venture with Ethiopia’s Marathon Motor Engineering through which it is assembling the all-electric Hyundai Ioniq in the country. The South Korean company also has a presence in Kenya through its dealer Caetano. It also has a presence in Uganda, Tanzania, South Africa and Morocco. 

• Hyundai is heavily invested in its EV strategy, aiming to become a leader in the global EV market. This involves expanding its global production capacity, developing advanced battery technology, and introducing new EV models. But to achieve this, it will have to battle Chinese EV heavyweights especially BYD, Xpeng and Nio but also the US’s Tesla. 

Our take

• Algeria's location provides access to both African and European markets, potentially allowing Hyundai to export vehicles produced in the factory. The company especially stands to benefit should Europe impose tariffs on motor vehicles from Morocco due to fears that it is being used by China to evade tariffs. 

• Hyundai plans to produce vehicles that meet the demand for affordable cars, which is a key factor for the Algerian market. But targeting the low-end market is risky considering that Chinese firms such as BYD are dominating this segment due to their state-backed subsidies and economies of scale. 

• Algeria is emerging as an attractive alternative to Morocco and Egypt, which have stronger automotive sectors. This move is likely to position Algeria as a key player in the EV market in North Africa. However, this influence could extend across Africa as long as Algeria-made EVs prove to be cost-effective.