Nigeria’s new car market drops by 67% in 2015

The combined effect of 70 percent tax on fully built cars (FBUs) comprising a 35 percent duty element and 35 percent levy, unfavourable exchange rate of the naira to the dollar and volatility in global oil prices which have adversely resulted to serious economic slowdown in Nigeria, adversely affecting the country’s big spenders on new vehicles, Business Day learnt.

Reports from the home market, corroborated on the sidelines of the launch of the all-new Hyundai Elentra for the Middle East and Africa region, reveal that all new premium luxury cars and basic models in Nigeria went down from 45,618 units between January and December 2014 to an estimated 15,031 units towards the last quarter of 2015, said Andrew Ajuyah, senior manager and head of marketing, Toyota Nigeria Limited (TNL).

In 2014, about 30 percent of imported new vehicles were sold to retail customers who are individuals or home unit purchasers, while 63 percent of households cannot afford to own a car without some kind of support, according reports from PriceWaterHouseCoopers (PWC).

The wide gap represents a 67 percent drop in the total number of vehicles sold in the country; a situation made worse by the absence of a single digit or convenient double digit interest auto consumer credit financing mode.

Between 2014 and 2015, the National Automotive Design and Development Council (NADDC) entered into talks with WesBank, a division of FirstRand Bank Limited of South Africa. This stems from a Memorandum of Understanding (MoU) between the duo to offer vehicle finance to retail and corporate fleet buyers. It aims to stimulate the sale of locally assembled vehicles in Nigeria and discourage importation of used ones. 

Reflecting on the 2015 business year and the automotive market, Andrew Ajuyah stated that the drop witnessed in the past three years, is a clear indication that the economy is passing through challenges due to a combination of variables.

These include but  are not exclusively limited to the 70 percent tax slammed on imported new vehicles, following the introduction of the automotive policy, low disposable income of consumers, the volatility in global oil industry and unstable exchange rate of the naira.

Government being the biggest buyer of new vehicles, has significantly reduced its spending on the acquisition on operational vehicles. The introduction of 35 percent levy and 35 percent duty on fully built units by government has huge implications with respect to imports.

Many fleet buyers, especially those engaged in the construction and agricultural businesses drastically reduced their purchases and scaled down their operations during the transition period to the new administration of President Muhammadu Buhari.

Many of these fleet buyers that are heavy spenders on automotive equipment and machinery slowed down their operational activities to cautiously watch the unfolding automotive policy direction of the new administration of when it was taking the Federal Government a long time to appoint new ministers.

Gimmey Caphais, an official with an Original Equipment Manufacturer (OEM) speaking on the sidelines of the launch, to Business Day motoring editor in Dubai, the United Arab Emirates, said the total Nigerian new-vehicle market in the past three years is in a tough spot, with year-to-date sales dropping drastically.

According to Caphais, current expectations are that it will recover gradually as the market enters 2016. “There is nothing wrong with a market going down, but you need to manage the situation. You cannot flood the market with cars and destroy the brand.”

Under the National Automotive Industrial Development Plan (NAIDP), the main thrust is to reduce Nigeria’s dependence on imports and stimulate investment in local vehicle production. Government hopes that the move will help in conserving foreign exchange, create jobs for its teeming youth and also lead to the acquisition of technological know-how.

The plan is a ten-year strategic framework started in June 2014 that focuses on five key elements; infrastructure,  market growth, standards, investment promotion and skills development.

MIKE OCHONMA