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Algeria: Importation & Distribution in the Automotive Sector

This legal update provides a recap on the on-going material regulatory changes affecting importation activities in Algeria, with a focus on the Algerian automobile dealer industry.

Importation activities subject to the 49/51 rule

In a move to boost investments, the Algerian Finance Law for 2020 (promulgated on 30 December 2019) has lifted the requirement whereby foreign ownership in Algerian companies shall be limited to 49% (the so-called 49/51 rule), except for “strategic” sectors which shall remain subject to the 49/51 rule. Pursuant to the Supplemental Finance Law for 2020 (promulgated on 4 June 2020) and to the Finance Law for 2021 (promulgated on 31 December 2020), sectors which remain subject to the 49/51 rule include mining, energy, defense, transport infrastructure, pharma, and importation for resale without transformation. Companies involved in such importation activities which do not comply with the 49/51 rule have until 30 June 2021 to do so, failing which their trade registration will be deemed void.

Importation & distribution activities in the automotive sector subject to 100% Algerian ownership

With the objective of promoting its local car manufacturing industry and preserving the country’s foreign exchange reserves, the Algerian government has passed stringent legislations over the last few years in order to curb the importation of new vehicles. In 2016, import quotas were imposed and since 2018 all importation of new vehicles has been suspended. However, Algeria’s nascent car manufacturing industry is facing a crisis and the market is undersupplied in new vehicles. In order to relaunch imports, an entirely new regulatory framework for the importation and resale of new vehicles has been issued in August 2020 (Decree 20-227 dated 19 August 2020, the “Automotive Decree”). The main requirements under the Automotive Decree include:

  • the importer/dealer must be 100% owned by Algerian residents, hence foreign investors are excluded (noting that foreign investors are not subject to the 100% requirement for the distribution of cars they manufacture locally);
  • only one approval by the Ministry of Industry can be issued to a distributor for a maximum of two brands;
  • the approval is subject to compliance with technical specifications (e.g., facilities, training of personnel);
  • a national sales network must be established within one year following the obtaining of the approval; and
  • the agreement with the car manufacturer must be on an exclusive basis and for a minimum duration of five years.

It worth noting that the scope of the Automotive Decree does not include the importation of spare parts which is subject to a 51% Algerian ownership (pursuant to the 49/51 rule) instead of 100% for the importation of new vehicles.

Next steps

Some of the aforementioned new requirements are a significant concern for foreign investors in Algeria, particularly the obligation to comply with the 49/51 rule by June 2021 for importation companies and the exclusion of foreign investors from the importation & resale business of vehicles. Hence, it is not impossible that such requirements may be lifted or softened in the short run. If a change of position occurs, it is likely to be implemented by the upcoming Supplemental Finance Law for 2021 expected to be promulgated in June. Furthermore, a new Minister of Industry was appointed in February 2021 with a clear mission to revive the automotive sector.

 

Matouk Bassiouny in association with SH-Avocats

1 bis, Chemin des Glycines – Algiers – Algeria

info@matoukbassiouny.com