Morocco, SA, Egypt dwarf Nigeria’s $210m auto industry

…Industry seeks N100bn auto funding

Nigeria’s $210 million automotive industry is lagging peers such as Morocco, South Africa, and Egypt due to low demand for made-in-Nigeria vehicles and over-reliance on imported second-hand vehicles.

Statistics shows that Nigeria produced about 2,034 units of vehicles in 2023, estimated at $210 million and accounting for about 0.04 percent of the gross domestic product (GDP). On the other hand, Morocco’s automotive industry produced 535,825 units of vehicles in 2023 valued at $31.4 billion and accounting for 24 percent of the country’s GDP.

South Africa, ranked as the continent’s second-largest automotive producer, made 633,337 units of vehicles estimated at $20 billion, contributing 5.3 percent to the country’s GDP. Egypt produced 23,754 units of cars valued at $1.5 billion, contributing 0.31 percent to the Egyptian GDP.

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In Nigeria, Nissan Motors, Honda Motors, Innoson Vehicle Manufacturing Company, Hyundai Motor Company, Ford Motor Company, GIC Motor Companies Ltd, JAC Motors, KIA Motors, Dangote, Sinotrucks, Elizade, Lanre Shittu Motors, Mikano, Nord, PAN Nigeria Limited, Milkano International, and VON Automobile Nigeria are prominent automakers or assemblers.

In Morocco, over 250 car and components manufacturing companies, including Stellantis, Opels, BYD, Fiats and French automaker, Renault, operate.

Moroccan government offered subsidies of up to 35 percent for manufacturers to put up factories, expand ports, free zones and rail infrastructure, enabling the training of skilled workers. This has placed the industry in a good position to lure investments.

South Africa has companies such as BMW, Mahindra, MAN, Stellantis, Nissan, Ford, Toyota, Volkswagen, Mercedes, and Volvo Trucks. In 1995, the South African government launched the Motor Industry Development Programme (MIDP) to encourage vehicle and component manufacturing through export.

This was succeeded by the Automotive Production and Development Programme (APDP) to increase local content input.

Meanwhile, Egypt has Bavarian Auto Group, El Nasr Automotive Manufacturing Company, Al-Mansour Automotive Company, Mercedes Egypt, GB Corp and Manufacturing Commercial Vehicles.

Nigeria’s vehicle assembling plants have a combined capacity of 500,000 vehicles per annum but produce about 2 percent of the installed capacity despite a combined investment of over N500 billion, according to the National Automotive Design and Development Council (NADDC).

“We are not getting the needed patronage from the Nigerian market, which explains why our plant is assembling below capacity at the moment. We don’t have the customers that we expected in Nigeria,” said Takashi Nakajima, managing director of Honda Automobile West Africa (HAWA), during a recent visit of NADDC to the plant in Ota, Ogun State.

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He said automakers in Nigeria need the market and demand because they are producing to sell and not to stockpile them.

“We want the government to restrict the importation of used cars and look into auto financing. The interest rate is very high and can discourage customers from buying new cars. Therefore, we want government to come in here to support customers,” he said.

Also, Remi Adams, head of sales, marketing, and logistics at HAWA, said the Honda Plant has an installed capacity of 10,000 per year but is presently doing about 2000 units per year.

He blamed Nigerians for importing used and salvaged vehicles to the detriment of the business of local assembling plants.

The value of passenger car imports into Nigeria jumped to N1.47 trillion, a 224.67 percent increase from 2022, according to the National Bureau of Statistics.

Joseph Osanipin, director-general of NADDC, said the percentage of Nigeria’s auto industry contributions to the GDP and job creation is still very low compared to Morocco and South Africa.

“We need to support locally-made vehicles. By choosing made-in-Nigeria cars, you are investing in the future of our nation. Let us consume what we produce and produce what we consume,” he said.

Benneth Ejindu, a board member of the Nigerian Automotive Manufacturers Association (NAMA), said despite the huge potential and abundant deposit of raw materials, Nigeria’s automotive industry is performing poorly.

He said Nigeria can build its industry based on domestic demand with exports being an additional benefit.

Ejindu said Nigeria needs to sign the NAIDP 2024 into law. He further said the country should develop and implement an automotive raw materials and component manufacturing masterplan and incentivise CKD assembly through contract manufacturing to boost automotive manufacturing.

He noted that Nigeria could make welded parts such as exhaust systems, seat frames, elect parts including batteries, trafficators, wiring harnesses, and plastic and rubber parts such as tyres, tubes, fan blades, seat foam, oil seals, hoses, radiator grills among others.

He said parts such as radiators, cables, filters, brake pads/linings, windscreens, side glasses, fiberglass parts, and paints, can be produced locally rather than importated.

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Meanwhile, Luqman Mamudu, a former government adviser on automotive policy, said the importation of second-hand vehicles has been undermining local vehicle manufacturing.

To change the narrative, he said Nigeria needs to pass the NAIDP 2024 to 2034 Act to engender investor confidence.

He advised that all imported used vehicles, including salvage, must be accompanied by certificates of integrity from originating countries.

Mamudu called on the government to create an N100 billion intervention fund to serve as vehicle acquisition loans for only made-in-Nigeria cars.

He said the loans should be directed only to commercial vehicle fleet operators to flood Nigeria with shared car services, buses, and trucks to help arrest the upsurge in transportation costs and drive down inflation.