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Nigerian Cars Industry

In sub-Saharan Africa, Nigeria with a population exceeding 120 million represents the largest consumer economy and has witnessed a significant growth in vehicle ownership amongst its people. Relative to the other countries in the region Nigeria therefore represents the largest regional market in Sub Saharan Africa. Apart from the individual members of the public, corporates (including international companies) and Nigerian government departments represent the major customer segments in the country. The companies and the government of course operate large sized fleets of cars in addition to commercial vehicles like trucks, vans, buses etc.

In 2004, the annual sales in Nigeria of cars was 29,000 units which are significantly higher than its neighbouring countries like Ghana (4500 units), DR Congo (16,000 units), Ivory Coast (17,000 units), Angola (4,700 units) etc. Additionally, there could be a further 25 % or so being smuggled into the country illegally through the land borders. Nigeria also has a few vehicle assembly facilities that have an annual installed capacity of about 100,000 units. However, the low per capita income the Nigerians adversely impacts their affordability for new vehicles.

Nigeria has traditionally relied on import of used cars which has been at a level of 60-70% of the total imports. The government came up with a regulation to curb import of used cars that are more than 8 years old – however illegal imports still continue from neighbouring countries. The intention was to try and reduce pollution and increase quality of cars plying on the street as well as to encourage local production. The volumes on used cars witnessed an increase also give the fact that the Naira was depreciating rapidly making imports of new cars much more expensive.

The local facilities in the automotive sector are said to have capacity to produce 108,000 cars, 56,000 commercial vehicles, 6,000 tractors and 500,000 motorcycles annually. The growth in local manufacturing has not been significant given the high initial outlay necessary as well as because of the slow development of subsidiary industries necessary to supply local ingredients of good quality.

The government’s National Automotive Policy aims for encouraging local component manufacturers, provision of basic infrastructure for the industry; supporting the assembly plants and investing in training and retraining of manpower for the industry. The industry currently operates on a trade deficit with imports far exceeding exports. The government is hoping that economic growth and raise in oil prices/production should aid development of the sector in the coming years. However, factors like the withdrawal of subsidies for fuel has resulted in increases to the prices at the retail level, thereby creating more issues for the industry.

Recently the government announced a pilot project of consumer car finance, designed to encourage purchase of locally made cars. It is intended for the military and police whose numbers are around 10,530. An amount of Naira 12bn is expected as contribution from five parastatals namely Nigerian Ports Authority, National Maritime Authority, Federal Airports Authority of Nigeria, Nigerian National Petroleum Corporation and Petroleum Technology Development Fund. Three Nigerian produced Peugeot brands are involved in the scheme.

The country has six car plants in different locations. The government has a shareholding participation in all the plants but is trying to privatize the sector with a view to generate private investment and improve prospects of local production and exports.

Peugeot’s facility in Kaduna is the largest operator that manufactures three of its models (504, 306 and 406) locally, with a production capacity of 300 units per day. The facility utilizes 37% of its requirements from Nigerian companies (atleast 70 firms). France’s Peugeot has a shareholding of 40% in this facility with the government owning 35% and other local institutions the balance. The company has been in operation from 1972. The prospects of the company have been recently enhanced by its exports to Cameroon, Senegal and Ivory Coast. Peugeot enjoys a 40% market share in the Nigerian market.

The other government involved operations in the industry are Anambra Motor Manufacturing Company, Enugu (joint venture with DaimlerChrysler), Mercedes-Benz and Volkswagen Nigeria (recently privatized successfully).

Mercedes-Benz ANAMMCO was established in 1977 with an investment from DaimlerChrysler and is located in Enugu. ANAMMCO began production in 1981 of commercial vehicles over five metric tons with an installed assembly capacity of 7500 commercial vehicles and 1000 buses. However, the capacity utilized is hardly 30%. The plant facility covers about 300,000 square meters in Emene, near Enugu.

Players like Toyota Nigeria and South Korea’s Kia are planning assembly units within the next three years or so, while plans seem to be in advanced stage in the case of the Volkswagen facility that is being restarted to produce cheaper cars.

In terms of importation of new cars, the government has announced some stringent regulations requiring all motor dealers to register with the Ministry of Transportation in Lagos which will also monitor imported cars.

Nigerian market is covered by most of the global automobile brands like Toyota, GM, Nissan, Honda, BMW, Audi, Mercedes, Hyundai, Kia, Volkswagen, Skoda and a host of others.

In the new cars segment, the market leaders are Stallion (owned by the international billionaire businessmen Vaswani Brothers-Sunil Vaswani, Haresh Vaswani and Mahesh Vaswani), that holds an impressive array of assembly industries and exclusive sole representations for prime European, Japanese and Korean brands. The group pioneered a culture of international standards in the country and rapidly achieved market leadership position by focusing on a whole range of services including sales and after sales. Their dealerships are widespread across the country as well as in other West African countries.

Toyota Nigeria Ltd. was formed by Toyota Japan in order to streamline its local market position in 1995. Holding the master franchise for the country, the company operates through its dealers Globe Motors, Omoregie Motors, RT Briscoe and Elizade located at different areas.

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