Whoever emerges the next president must look at the Automotive Policy again.
Back in 2012, Nigerians could afford to buy new cars at N4 million each. Six years after, prices of new cars have shot up to N10 to N20 million each, pricing out the middle-class who often make up a large percentage of buyers.
The 2013 National Automotive Policy imposed 35 percent levy and 35 percent duty on imported vehicles, amounting to a total of 70 percent.
Even with 70 percent fees paid on imported vehicles, importers of damaged or ‘accidented’ vehicles officially enjoy a rebate of 30 percent. What this has done is to encourage the importation of rickety vehicles, which make up 70 percent of imported cars today.
The age of most imported used cars in Nigeria is 15 years, whereas that of Algeria, Angola, Chad, Mauritius and Seychelles is three, according to a research done by PwC, presented by Andrew Nevin, partner and chief economist at PwC Nigeria in Lagos.
“Imported used car segment (Tokunboh) dominates the industry, accounting for 74 percent of all vehicle imports, making Nigeria the largest in the world. Ten percent of imported cars are less than three years old, while 63 percent are over 11 years,” Nevin said at Lagos Chamber of Commerce (LCCI) automotive sector event.
The prohibitive levy and duty paid on imported cars have encouraged smuggling of vehicles into Nigeria. Officially, market for cars in the country is just 6,999 as against 555,716 in South Africa; 181,001 in Egypt; 168,913 in Morocco, and 94,408 in Algeria.
So, for investors, there is no market in Nigeria. But in a country where right things are done, this should not be the case.
“The fact is that cars are too expensive. We have seen a market drop of 75 percent in the last three years. Increase in duties has increased smuggling,” Pelletier said.
The National Automotive Design and Development Council (NADDC) has issued licenses to 54 vehicle companies for local assembly. Industry experts estimate the capacity of these firms at 400,000 units per annum.
The National Bureau of Statistics says Nigerians imported 105,189 units of vehicles in 2016 through the ports and raised the number to 181,404 (72.46 percent increase) in 2017. The capacity of 54 licensed asemblers is 410,000 units.
“If we want to develop a market for 54 companies that have got licenses with 410,000 capacity plants and we import a huge number of used vehicles, how are we going to support vehicles being assembled, since the ones assembled locally will be more expensive?” Bambo Adebowale, chairman, Auto and Allied Sector group of the Lagos Chamber of Commerce (LCCI), asked in a recent interview with BusinessDay.
PwC estimates that 410,000 cars were imported into Nigeria in 2014, out of which 74 percent are used. Passenger cars and commercial vehicles lead vehicle sales with a combined share of 61 percent. Corporate purchases account for the largest share of vehicle sales with 34 percent of the market, while individual purchases are a close second, owning 30 percent of the market.
At this point, the auto policy is not making any headway with government losing a significant revenue from smuggling and importation of accidented vehicles; the local assemblers not selling because of pricing, key players say Nigeria needs to come up with a policy that will make vehicles affordable.
Experts say the real issue is affordability.
The ultimate aim of the immediate past government was not only to develop a local auto industry but also to provide cars at cheaper rates.
Five years down the line, Nigerians do not see cars anywhere. Even they see these cars, they are expensive.
A sample list of 1.6-litre engine cars used by banks and other corporate buyers have had their prices double between 2014 and 2017.
In 2014, a brand new Kia Cerato 1.6 litre automatic transmission saloon car cost N3.96 million, but this went for N9.54 million in 2017, according to BusinessDay findings. A Picanto one-litre engine capacity car went for N2.25 million three years ago, but was sold for N4.95 million in 2017.
Similarly, Toyota Corolla 1.6 litre GLI automatic transmission fabric was sold for N4.45 million in 2014, but it surged to N18.9 million last year. During the same period, a Mescedes-Benz C200 luxury Sedan, which was sold at a dealership price tag of N10.5 million, cost N25 million in 2017, while a G63AMG model sold for N50 million currently wears a price tag of N78 million today.
Analysts want the new president to have another look at the Auto Policy to enable local firms that have invested into the industry to produce and make profits, while Nigerians are able to buy cars.
ODINAKA ANUDU
