Volkswagen is considering producing cars in Egypt, part of plans to tap new African markets as it grapples with weaker demand at home.

“We are very interested in Egypt as a production hub and hopefully we can announce a business case anytime soon,” Volkswagen Group Africa’s managing director, Martina Biene, said in an interview.

Under the possible moves, Europe’s largest carmaker could first establish an assembly unit by using existing facilities. A potential next step would be to build a local factory in the Middle East’s most populous nation, Biene said.

VW is cutting production capacity and jobs in Germany due to increasing costs, weaker markets in Europe and the rise of cheaper Chinese competitors. Sister brands Audi and Porsche are also shedding workers to reduce costs.

The deliberations come as Egypt strives to attract foreign investment and boost local manufacturing and exports after emerging from a grueling two-year economic crisis. The auto industry could be a key driver, with the government estimating local demand at more than $8 billion per year over the next decade.

Egypt’s domestic market and its proximity to consumers in the rest of the Middle East and Africa may be among the draws for the location.

That makes it different from Morocco, currently Africa’s leading passenger-car manufacturer and largest exporter, Biene said.

In Morocco, the “car business is very much focused on exporting to Europe,” she said. “We’re currently not looking for expanding our footprint with plants to export to Europe, because we’ve just closed plants in Europe.”

VW, which plans to trim German production capacity by more than 700 000 units and cut 35 000 jobs by 2030, has traditionally struggled to compete in cost-sensitive markets like Africa, India or Southeast Asia against leaner rivals such as Toyota or Hyundai.

The company currently has a full-fledged manufacturing plant in South Africa and assembly facilities in Ghana, Rwanda and Kenya. It targets operating as many as five production facilities across Africa over the next 10 to 15 years, with each producing different models and exporting to other markets on the continent.