The issuance of the new Automotive Guideline in Algeria

Indeed, the decree is designed mainly to regulate the Automotive industry and to prevent the backdoor importation through two main levels.

On the one hand, the increase of the integration rate to 30% instead of the 15% rate that was initially set by decree No. 17-344, now repealed.

On the other hand, the lifting of customs advantages relating to assembly kits. As a result, assemblers can continue their activity but without being able to benefit from custom advantages. 

Thus, the new specifications are more restrictive but do not prevent 100% foreign investment in the sector even if the automotive assembly and distribution activity is subject to compliance with certain criteria and conditions and subject to the control of the Ministry of the industry.

What are the eligibility criteria for exercising the automobile assembly and distribution activity?

The exercise of the automobile assembly activity is subject to financial and technical criteria laid down by the new decree. Regarding financial criteria, a minimum financial contribution of 30% is required for local investors as well as foreigners.

As for the technical criteria, the local investors have to prove an experience of 5 years in the field of the production, while foreign investors must prepare the detailed technical status of the project and provide the project with their know-how. 

On the other hand, they are no longer required to associate with local partners and they may benefit from tax advantages and reliefs for a period up to 10 years.

 In addition, they are exempted from both customs duties for imported goods entering directly into the implementation of the project and from the VAT for goods and services imported or acquired locally, entering directly into the realization of the investment.

 Thus, these specifications provided in the guideline open a door to foreign investors.

What are the conditions and clauses required for the conclusion of the concession contract?

In order to conclude the Concession Contract, the dealer is subject to certain conditions. 

First of all, it can only claim a single license allowing it to exercise the activity and represent up to two (02) vehicle brands in the national territory.

 In addition, the dealer will not be able to import the vehicle without first having an order from a customer. 

As for the terms of conclusion of the Contract binding the dealer to the grantor, it must be concluded for a fixed period of 05 years minimum and must not be exclusive. 

In fact, Algerian law prohibits any exclusivity and considers it as a practice aimed at limiting the competition, unlike European Competition Law, which adopts a much more nuanced position by authorizing exclusivity. 

Thus, in Algeria, the freedom of the contracting parties is framed by texts governing the activity of automobile assembly and distribution and the conformity of the Contract is checked by experts. 

However, unlike the repealed decree, the dealer is no longer required to invest in an industrial or semi-industrial activity in order to maintain its license.

Which are the procedures to follow in order to carry out the automobile assembly and distribution business?

Regarding the procedures for carrying out the automobile assembly and distribution activity, no significant change has been made compared to the repealed decree.

 Indeed, the investor willing to operate such an activity is subject to the obtaining of a provisional authorization of 36 months, renewable one year, issued by the Ministry of Industry and certain documents will be required. 

It is worth to note that the authorization makes it possible to take the necessary steps to carry out the project without authorizing the exercise of the activity. 

In fact, article 09 of Decree 20-226 requires the award of a final approval for the effective exercise of the activity of assembly and distribution of automobiles. Thus, this approval is considered as the key to launch the project.

Finally, the main objective of the Automotive Guideline is the establishment and boost of a mechanical industry based on an industrial approach in line with international standards in Algeria.

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