Automobile companies in Nigeria in the last one year have recorded low sales of Made in Nigeria cars as vehicle imports continue to dominate sales despite the launch of the National Automotive Policy.
What are the causes of the low sales in Nigerian vehicles?
The MD of Toyota Nigeria, Mr. Kunle Ade Ojo who briefed newsmen during their quarterly meeting at their Lekki office disclosed that the total sales figure of vehicles across the country including all brands stood at 2,000 units when compared to 5,500 vehicles sold within the same period in 2016.
He also said that “The poor sales of vehicles are attributed to the scarcity of foreign exchange, devaluation of naira and the high interest rate coupled with the economic shortfall hiked prices of vehicles and crippled buying power of many buyers.”
Another contributing factor to the fall in sales of Made-in-Nigeria cars is the high rate of importation of foreign cars by Nigerians.
Some details on car importation
The Director General (DG) of the National Automotive Council, NAC, Mr. Aminu Jalal also weighed in on the issue providing an explanation as to why locally made (or assembled) vehicles are experiencing challenges.
According to Jalal, Nigerians spend about ₦600 billion annually on importation of vehicles. 50,000 new and 150,000 used vehicles are imported into the country yearly.
He said “Nigerians spend an average of ₦400 billion on importing passenger cars. By the time you add trucks and other vehicles, the amount Nigerians spend on imported vehicles will be running to ₦600 billion annually”
Made in Nigerian cars?
Mr. Aminu Jalal also clarified that producing vehicles locally does not mean that the vehicles would be 100 percent made in Nigeria.
He said “Our approach to a Nigerian vehicle is that the vehicle that is being assembled will have up to 60-70 per cent local content; then you can call it a Nigerian vehicle.”
Jalal also explained that the proposed launching of Made-in-Nigeria vehicles in 2017 was no longer realistic due to unfavourable policy that encouraged vehicle importation to the detriment of production. He also added that the plan was initiated when import duties was 30 per cent but had now crashed to 10 percent.
Also, the average Nigerian mentality about Made-in-Nigeria product can be said to be a hindering block to the demand of Nigerians for locally made vehicles. The average Nigerian still believes that imported cars are of greater quality than locally made cars.
How does the fall in sales affect the automobile industry?
According to the MD of Kia Motors, Mr. Jacky Hathiramani, the auto policy has enriched Nigeria with a number of assembly plants, as many new cars sold in the country today are locally assembled because of the auto policy. Nigeria thus has the capacity to produce 380,000 cars per year.
However, even with the production capacity of 380,000 cars per year of Nigeria, the decrease in sales will discourage the production of more cars. The assembly plants will then produce less than they are supposed to. The automobile industry will begin to run at a loss with little revenue to march against its operating costs. Also, the assembly plants will be obsolete; this will in turn result to a low Return on Investments (ROI) to investors.
What should be done?
The Government and automobile companies should sensitize Nigerians to the good quality of Made-in-Nigeria vehicles. Also, the import duties should be increased; as a 10 per cent tax on the import of foreign cars is too low.