Can the Nigerian automobile industry be revived?

In Morning Crossfire 2019-09-10 10:16:19
Can the Nigerian automobile industry be revived?
Can the Nigerian automobile industry be revived?

There are articles on the history of the Nigerian Automotive industry two months ago. Here are some highlights to foster our conversation this morning on the show.

 

Organisations such as RT Briscoe, Leventis, UAC, SCOA and others started the development of the automotive sector in Nigeria in the 60s through menial establishment of automobile assembly plants using completely knocked down (CKD) or semi knocked down (SKD) parts.

 

In the 1970s, the Federal Government entered the business when it sealed pacts with a number of automotive plants in Europe to set up assembly plants that will build passenger cars, trucks and light commercial vehicles, using completely knocked down parts.

 

Around the 1970s -1980s, the FG signed a pact with the European Original Equipment Manufacturers (OEM) and set up two car and four light and heavy assembly plants. The plants were assembling vehicles from Completely Knocked Down (CKD) parts. These plants included Peugeot Nigeria Limited, Kaduna; Volkswagen Nigeria Limited, Lagos; Anambra Motor manufacturing Company (ANAMCO), Enugu; Styer Nigeria LTD, Bauchi; National Truck Manufacturer (NTM), Kano; and Leyland Nigeria LTD, Ibadan. Government privatized the firms in 2007.

 

In 1982, in a bid to give some boost to the industry, the FG signed a pact with five other international automotive concerns. The intent was to establish Isuzu plant in Maiduguri, Mazda in Umuahia, Mitsubishi in Ilorin, Nissan in Minna, and Peugeot in Gusau. But the plan was only a mirage. By the 1990s, utilisation of the assembly plants dropped to a record low of about 10 per cent. What followed was a total collapse of the sector.

 

Prior to the collapse, the plants reportedly had the capacity to produce 108,000 cars, 56,000 commercial vehicles, 10, 000 tractors, 1,000,000 motorcycles and I,000,000 bicycles yearly. From the foregoing, it became apparent that something had to  be done to salvage the automotive industry. Hence, the National Automotive Development Plan (NAIDP) was introduced in October 2013, by the FG.

 

According to the National Automotive Design and Development council (NADDC) “The plan is intended to drive the comprehensive development of the automotive industry in the long run and make Nigeria a regional powerhouse in the industry.”

 

The policy is also supposed to achieve the following:

 

•Employment creation (with the potential to contribute up to 10% of jobs);

•GDP contribution (up to 10%);

•The processing of raw materials and local industrialization through the value chain which spans a range of activities which include design and development, manufacturing and service related activities such as marketing and sales and maintenance / after sale service;

•Small, Medium and Micro-Enterprises (SME) development in respect of automotive parts, components and services;

•Skills development;

•Technology and innovation (Research & Development)

Currently importers of brand new cars are required to pay importation tax (duty and levy) of 70 per cent (which is 70 per cent of the cost of the car purchased); import tax (duty and levy) of 35 per cent on commercial vehicles and 35 per cent on used vehicles. Whereas for local assembling plants/companies, the importation tariff is zero percent on Completely Knocked-Down (CKD) components. There is also a ban on importation of fairly used vehicles via land borders.

 

Bawo Omagbitse, a responder on the Morning Crossfire show, says the auto industry has been doing well for some time now due to changes made. According to him, “the industry has changed a lot since PAN came into the Nigerian auto market in 1972. However, since 2007 the market has been shrinking and that has to do with the capacity of the individual to spend. I think it is now more intense to surve in this business.

 

“Today when you look at the structure of the industry you will find that it is about seven percent to 93 percent of new vehicles to pre-owned vehicles. What that means is that pre-owned vehicles are crowded out.”

 

The question is; what other measures must we put in place to fully revive the automotive industry?

 

Watch the program below and leave your comments

 

 

Guests on the show:

 

•Obum Osigwe - GM Sales, Innoson Vehicle Manufacturing

 

•Mr Bawo Omagbitse – GM, Strategy and Marketing, Peugeot

 

#MorningCrossfire with @wemimospot @SheriffQuadry