OLUWATOBI AJAYI, is the founder and CEO of Nord automobile limited, also known as Nord Motion, a Nigerian automotive firm that assembles vehicles locally. He tells CALEB OJEWALE about the company’s journey over the last four years, and its goal of ‘normalising’ Nigerians and Africans generally buying brand new vehicles. Excerpts:
What would you say made you think it was a good idea to go into this industry, and at the time you did?
All my life, I’ve always gone for the most impactful even if it is a more difficult area of anything. My friends always tell me that I like to go for the difficult things, which of course yields very good results. I like to make a huge undeniable difference anywhere I am, that’s how I’ve always been, and it even earned me the nickname ‘Super Tobi’.
I was always trying to do what nobody wanted to do, even when I knew it was going to be difficult, I was ready for it. I knew it was going to be difficult (venturing into the Auto industry) and I was prepared to go for it, but I didn’t know it was going to be as difficult as it actually became.
It actually became a lot more difficult than I thought, but I was able to go through it, which I believe is because I was prepared. I was ready to dig deep at times. I have to be very honest with you, there were times when I felt like giving up, there were times when I actually really gave up and I was just waiting to move on to the next thing like I wanted to go into farming and the rest, but for one reason or the other I didn’t give up eventually and I’m happy I didn’t.
It has been worth it when I see the results, how much impact we are making, how many people we employed, how many families are happy because we’re existing,
In the four years of existing as a company, how many units have you produced so far?
For the first two years we didn’t produce any units because we were doing R&D, testing, consulting or talking to the regulators. We started commercially around late 2019-2020, so that’s about two years now. So since then till now, I think we have done close to 200 units across all the types of vehicles.
Where is your factory located?
We have two; one is in Sangotedo, the other is in Epe, but the Epe one is the main one.
What is the capacity in the number of vehicles your company can assemble in a year?
The one at Epe, which is the main one can do at the moment five units a day, but if we add just a little bit more investments, through equipment which we can buy within one month if demand pushes us, then we can move to 25 units a day. And that is all for one shift. If we add one more shift we are going to do 50 units a day. In summary, we can presently do five units a day but within one month we can go to 25 units a day (with demand and the right investment).
How did you feel the day your first vehicle was made, can you remember that date?
I have pictures and videos of it. It was emotional. Everybody was screaming and shouting. It was nice after years and months of R&D, regulatory negotiations and everything. It was really nice. I have the video on my phone, it was so emotional, but I can’t show you, we were just shouting and happy, maybe one day when we are really big, I will show the younger generation. The day was in 2020.
Since making that first vehicle and the number done so far, why have you not been operating at full capacity?
In a good month, we produce for 10 days maximum, but on average we do four days a month; we lock the place and go because that’s the number of orders we have. So when people say that the capacity in Nigeria is not enough to meet the demand of Nigerians, I’m really wondering. The good thing is if they actually allow us, with our capacity, prices will drop because of the economies of scale, which will allow me to share the cost more evenly and the prices of everything would drop.
What exactly is hindering this demand?
There are three reasons why Nigerians don’t buy new cars. The first one is financial. The second one is economical. The third one is social. Let me start with the economical reason; we are a country where we don’t earn much.
And we are playing in an industry that is global. Just like most industries the price of gold almost everywhere is the same, the price of petroleum products even if not subsidized by the government is almost the same everywhere in the world, so is the price of steel which is used in making most parts of a vehicle or aluminium, these cost the same price all over the world. So basically we are in a world where the price of a vehicle is more or less the same thing. So, a decent vehicle anywhere in the world in the US, in Japan, in Europe is going to be around $18,000, keyword is decent. That is, the trusted vehicle that three years after you can wake up in the morning and start the vehicle and you are not afraid to start it, which is what we are producing.
That is around N9 million, but how much is an average person in Nigeria earning? It is probably N500,000 – 600,000 for someone we can call having a well-paying job. Multiplied in a year, that’s just about six million a year. That person cannot even buy that vehicle out rightly as we do here.
Like I said earlier, a brand new vehicle will cost at least $18,000, so we fall back to buying a used vehicle that even the lowest level citizen will not drive in the US. Those vehicles that are actually meant for the dump, where they’re going to crush them, are sold online for $1,800, which is less than a million naira, but on the street here in Lagos, they tell you the vehicle is very clean and it’s going for over N4 million. So in reality, you are actually (mostly) paying for the shipping and the customs duty.
Number two is finance. So even if you get somebody that earns a certain amount, let’s say you finally find somebody that earns about N1.5 million in a month. That person may not want to use the entire seven-month salary to buy a N10 million vehicle. Therefore, we need to solve the problem of auto financing (and asset financing).
A vehicle is usually the second most expensive thing that an average person will buy in their entire life after a house. That’s why it is normal and understandable that you are not paying for it out rightly. But in Nigeria, you have to pay for it out rightly, so that’s the second problem. We don’t have the financing structure to make vehicle purchase easier for people, especially for brand new vehicles, so what happens; people again fall back to ‘Tokunbo’, where you can just buy used vehicles for 2.5-3.5 million naira.
The final one is social. Even people who earn well, earning close to N100 million a year, and can easily buy a N25 million car would still not buy a brand new car. They will rather buy N25 million used vehicle or N35 million used vehicle. Why? Because in Nigeria, and I hope it changes soon, it is socially acceptable probably even socially praised to drive Tokunbo cars. Whereas in Europe or in the US, if you buy a used car, it means you don’t have the means.
Nobody is going to willingly and happily, say ‘I am a well to do man’ and buy a used car for their spouse on their wedding anniversary or birthday. People won’t do that in Europe because it’s seen as almost buying used cloth for yourself. The same way you won’t buy a used shirt for your friend or your spouse, that is the same way they won’t buy a used car for them. But right now in Nigeria, people buy used cars and put a ribbon on it, even do thanksgiving in church. Some of these are people that actually have the money (for new cars), even though they know that used brand is making them closer to their mechanic. They don’t care.
But when such a person wants a vehicle that will deliver value in business and avoid the mechanics, he goes for a brand new vehicle like from Nord. But when he wants to go to church or visit his friends, he wants to buy a brand that is well known even if it is used. We need to get to the point where we as a people start to make people understand that, it is better buying a brand new thing than the used one and the fact that being a foreign brand doesn’t make it any better. Until then I think we are still going to have problems with increasing the volume of brand new vehicles in Nigeria.
To add some facts, Nigerians buy more than one trillion naira worth of vehicles that are imported every year and we’ve been doing that for more than 10 years. Between 1 trillion to 1.5 trillion. That’s an average of 3.5 billion US dollars. So this is a $3.5 billion market, but only 3 percent of that market is brand new. Until we do something to change that, the assembly plants that we built will still always not produce vehicles to their capacity.
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Now, taking the cost away, you’ve also mentioned financing, what do you have in place in terms of financing to address some of the challenges you have identified in affordability?
We partner with a couple of banks, about five of them at the moment. So as long as the person has a good credit history, all the person needs to do is come to us, of course with our bank or their bank (also if their bank is one of our partners) and make an initial deposit of about 30 percent- 40 percent of the retail value of the vehicle and spread the payment for at least, I think about 12 months. There are plans to spread to 24 months.
What do the interest rates look like?
Nord is actually subsidizing the interest rate. I think the interest rate is currently about 16 percent per annum, but we are doing at a flat interest rate of about 10 percent per annum. So we’re subsidizing. We are taking the heat of 6 percent for the customer.
What kind of engines come in your vehicles?
We use Mitsubishi and Toyota at the moment, because they’re easy to maintain in Nigeria. Of course as we grow as a company and as a country and the expertise of Nigerian schools, we will design our own engines to be used. But for now, we’ll keep using Mitsubishi and Toyota, because they are easy to maintain and the parts are easy to find all over the country.
The next thing is designing the vehicles. It is not strange to hear things about people doing local assembly but copying foreign brands and things like that, where do your designs come from?
We have a head of design who originally is an architect and we have a full design team, which I’m a big part of. We design our things here in Nigeria. We have a partner in Germany that helps us to put them into perspective also, do some testing, aerodynamic testing, and the rest then we send it to China where we make our body. In summary, we have a very robust design team here in Nigeria and in Germany.
To follow up on the engine and parts you mentioned earlier on, availability of parts is a big deal for many people when making a car purchase decision, how much can they count on you, or can they walk into Ladipo market and request for a Nord part?
I think Nord has one of the widest after-sales networks in Nigeria. I’ve done my checks and I don’t think any of our competitors, no matter how big they are or how small they are, I don’t think they have as much after-sales network as us in this country, we’re almost everywhere, We’re in Lagos, we have about four points in Lagos. We’re in Abeokuta, Ijebu-ode, Asaba, Benin, Port-Harcourt, Kaduna, we have two places in Abuja.
I don’t know how many auto companies that have such a network. Not all are owned by us, but all are controlled by us. So we have our dealers or after-sales dealers that help us maintain our customer vehicles. So customers can go to all these places and have very relaxed and confident maintenance of their vehicle. We always advise customers to go there because we have a warranty for these vehicles. When you service in Auto Centres that are controlled by us, whatever happens to your vehicle after a period is our headache and we make sure to fix it, which is why we advise people to go there.
But if you for some reason do not want to do that, as I said, our vehicles use Japanese Parts, the engine, the chassis, the suspension, you can go to the nearest Ladipo market and decide to fish yourself. Of course, that may mean losing your warranty. But it also means the flexibility of fixing the vehicle yourself. It’s not like something happens to your vehicle and you have to wait to come to Nord and Nord says ‘oh you have to wait’, and I hear some of my other competitors having that problem. People complain about having to wait for two weeks for the part to come, but for us, it is not like that. We have enough orders in our inventory and even if you choose not to wait for us, you can go to the open market and buy these parts.
About your warranty and the likes, what do you offer in your vehicles?
Depending on the model, the lowest is two years and 200,000 kilometres. We also have four years and 100,000 kilometres.
Can you tell us how much investment has gone into establishing your assembly facilities?
It is a lot. It is like the more you go into it, the more money you need for it. I’m sure in terms of just fixed assets and not talking about the current asset, we have done close to 10 million USD already. There are other areas, maybe research, but I’m just talking about fixed assets.
How were you able to fund it? Are there external investors?
I started by funding with my small money at the time. But of course, within five months I exhausted it and I had to look for investors. I was giving up already. It was expensive. I spent the money going around the world going to OEMs, signing contracts, paying for modes, paying for equipment purchase, chassis samples, testing, so it was a lot and the logistics of it also.
When the money was exhausted I was fortunate to meet people who introduced me to some investors and they came with funds (in exchange for 30 percent of the company), which stabilized the company a lot. And of course, we used the money to do a lot of things we are currently doing.
Do you have any plans to still get additional investors?
Yes, I don’t need to own supermajority like I currently own so yes. As we grow and expand, I’m sure we are going to need more funds and we will be going to the market to raise more money at that time. We are (also) looking to raise more money in future probably a couple of 18 months or in 24 months time.
Five years from now, where do you see Nord?
Five years from now, in the Auto industry in Nigeria, I think we will be modestly top 2; in terms of volume, market share, and in terms of brand perception. I see a great future for us, a very bright future for us.
QUOTES: I knew it was going to be difficult (venturing into the Auto industry) and I was prepared to go for it, but I didn’t know it was going to be as difficult as it actually became
In Nigeria, and I hope it changes soon, it is socially acceptable, probably even socially praised to drive Tokunbo cars. Whereas in Europe or in the US, if you buy a used car, it means you don’t have the means (for something new)
