Auto Brand Technology

Austerity On Four Wheels

Amidst observable increase in investors’ confidence in the new National Automobile Policy, Lukmon Oloyede x-rays some roadblocks that can supplant the expected revival of Nigeria’s auto  anufacturing industry.

Nigeria’s history of announcing grand economic policies with little implementation roadmap has remained the biggest drawback to the country’s industrial growth. This limitation coupled with poor infrastructure and limited local capacities have raised questions.

On the likely survival of the National Automobile Policy in the face of current national meltdown. With the emergence of Muhammadu Buhari as President, having a stable tariff regime is now at the mercy of the new administration. This fear is further underlined by the comments of the Vice-president, Yemi Osinbajo publicly last February when he openly questioned the wisdom behind the current policy.

Although Osinbajo said that his party the All Progressives Congress (APC), will “encourage local production of cars” he also added that “we will reduce the high tariffs that Nigerians are paying to import vehicles.” This reveals that in the short term, international car manufacturers with expansion plans into Nigeria will face uncertainty over tariffs – and potentially the commercial viability of some local ventures will be further enhanced. Early attempt made at developing the national automobile sector dates back to 1972 under the administration of General Yakubu Gowon who tried to evolve a sustainable auto policy. Unfortunately, due to policy inconsistencies, the plan was not followed through until the creation of the Z600 vehicle in 1997 by Mr Ezekiel Izuogu of Izuogu Motors Limited. This created so much hope but quickly fizzled out because of the popular “Nigerian factor”.

Known as a prototype first indigenous Nigerian car, Z600 was first launched in 1997. It was hailed as the first automobile of indigenous all-African Autobrandtechnology. Primed to be sold at the rock bottom price of only $2000, the cheapest car in the world then, it had a 1.8L four cylinder engine that got 18mpg and allowed the car to achieve a top speed of 140 km/h (86 mph). Interestingly, 90 per cent of the car’s components were made locally. Unfortunately, its mass production never took off. It was reported then that, a combination of financial and political hurdles prevented the car from going beyond the prototype stage.

The global automotive sales for 2015 is expected to reach about $89M, a 2.4% growth from 2014 while emerging markets’ share of global sales will rise from 50% in 2012 to 60% by 2020, according to the first Nigeria Whitepaper released by Carmudi.com recently. What this means is that, if the plan of the Nigerian government to revive the automobile industry via the National Automotive Industry Development Plan (NAIDP) introduced in October 2013 becomes a reality, then Nigeria is poised to join the league of car manufacturing countries The study revealed that 30% of car dealers in Nigeria had an increase in car sales over the past twelve months due to the changing economic climate, while 50% of car dealers surveyed reported a decrease. Nigeria’s auto industry is expected to remain relatively strong, but the critical policy changes, like the National Automotive Industry Development Plan, according to the report, have the potential to change the entire industry.

The much criticised tariff announced by the Federal Government has boosted international interest in establishing local assembly lines, with several major manufacturers already moving in. In February 2015, government announced that the full 70% tariff on tokunbo cars would be implemented in late June. The official reason was that domestic assembly couldn’t keep up, but the delay revealed the introduction of an unpopular tariff at the eve of a general election.

However, industry watchers argue that while the outlook for the automtive sector appears rather positive, the incentive regime for local manufacturers needs to be strengthened considerably to lower costs and stimulate demand. According to them, there is the need to establish the proper linkages between the iron and steel sector, petrochemicals, and other industries to the automotive sector by addressing the critical issues that have stymied the development over the years.

They explained that the nation cannot truly boast of a truly made-in-Nigeria vehicle if the base components such as engine blocks, gearbox casings and chassis are not made here.

Investors in the automotive industry in Nigeria will need to navigate a highly complex business environment, selecting the right local partners and interfacing with government agencies that have a reputation for difficulty and corruption. Making the wrong commercial or operational decision has the potential to lead to substantial damage to the investor’s reputation or balance sheet. According to Adeniyi Akinjogbin of Carmudi Nigeria, promoting the assembling of vehicles locally and selling them at much reduced rates will afford quite a number of people to the opportunity increase their purchasing power. He argued that Nigerians will keep importing vehicles, even if it is at 120%.

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“Why am I saying this? I visited a Hyundai showroom where few of the Hyundai vehicles which were assembled in Nigeria were displayed. I sensed we have been receiving low grade (if not lower grade) vehicles from companies such as Toyota Nigeria and other accredited dealers of Asian manufactured vehicles, for higher the price it would cost you to import them into the country. “I would support the automotive policy only if we get quality as premium as that of the United States or Canada. The policy is a good one, but carried out in a terrible manner. It is like you are forcing people to purchase what they do not want. What are the safety ratings of these cars? Do they go through any crash test? In the event of a major fault which affects an entire fleet, will there be recalls? They need to focus on quite a number of issues before going forward with the manufacture and assembling of the locally manufactured vehicles”, he stressed. Mr. Akinjogbin believes the new automobile policy would not only survive these harsh times, “but will usher in a new system which will not only promote affluence, and also support and improve our almost nonexistent automobile manufacturing industry.

In terms of intention, the government has good intention but I think there are a lot of projects and policies that when they get to the point of execution is where most of the Nigerian government plans always flop. Can the government take it from the point of intention to the point of execution? I think nobody can really answer that question right now because we have a change of government and there may be a lot of discontinuation from some of the past policies if the president reviews them and find them lacking in term of providing overall deliverables.

Terms

“I think the former President, Dr. Goodluck Jonathan had good intentions and prospects but in terms of expectations, we all have to see what the new government will do. The economic situation needs to get better. If people don’t have enough they can’t afford to buy a car.

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