Foreigners, Indigenous Battle For Nigeria’s Auto Industry

• Foreigners, Indigenous Battle For Nigeria’s Auto Industry

As Nigeria aspires to become Africa’s next automotive hub, local and foreign auto firms are locked in a battle for the soul of the industry, RASHEED BISIRIYU reports

Two prominent Nigerian businessmen that have been outstanding in the automobile sector of the economy are Chief Michael Ade-Ojo and Cosmas Maduka.

Ade-Ojo, who is the Chairman of Toyota Nigeria Limited and founder of Elizade Nigeria Limited, stands out as a major investor in the industry. The septuagenarian is called Mr. Toyota as the face of the leading automobile brand in the country and indeed the world. There are seven major dealers under the TNL, where Ade-Ojo holds sway. They are RT Briscoe, Elizade Nigeria, Globe Motors, Mandilas, Germaine Autos, Omoregie and Kojo Motors.

Cosmas Maduka, the billionaire President of the Cosharis Group, is also a dominant player in the industry. His firm represents many premium global brands in Nigeria, such as Rolls Royce, BMW, Range/Land Rover, Jaguar, Mini, Ford, MG and Joylong. He also controls a big chunk of the auto spare part business.

Toyota Nigeria and Coscharis Motors are not the only indigenous players in the industry. Other auto firms largely owned and controlled by Nigerians that have kept the business going over the years are Lanre Shittu Motors, Innoson Vehicle Motor Manufacturing Company Limited, MB Automobile Services Limited, Globe Motors Holdings Nigeria Limited, Elizade Nigeria Limited and Pan Nigeria Limited, Anambra Motor Manufacturing Company Limited, Hyra Motors, National Trucks Manufacturers Limited and Oluwalogbon Motors Limited.

The contributions to the development of the industry by Chief Olukunle Bakare of Oluwalogbon Motors; Dr. Emmanuel Ojei of Nuel Ojei Holdings; Oluseyi Onajide of RT Briscoe; Anthony Arenyeka, formerly of General Motors; Mr. Frank Nneji of ABC Motors/Transit Support Services; and the late Chief Molade Okoya Thomas of CFAO Group cannot be ignored.

Weststar Associates Limited, Kewalram-Chanrai, Leventis Motors, CFAO Automobile and C&I Motors, among others, have invested significantly and are still investing in the nation’s automotive sector.

The Indians led by the Vaswani brothers, owners of the Stallion Group, are not leaving anything to chances in their bid to gain control of the industry, taking advantage of the Nigerian Automotive Industry Development Plan (auto policy), which was introduced by the Federal Government in October 2013.

Ade-Ojo and Maduka may have seen this coming when they led other dealers of imported vehicles and operators of allied business to protest the auto policy, alleging that certain individuals were already privy to the details of the policy before it was announced. They also said the short notice favoured a group, which later turned out to be the Stallion Group.

While the controversy rages, the Stallion Group and a few others in support of the new policy have initiated and concluded partnership deals with some foreign automakers for the establishment of vehicle assembly plants in Nigeria.

According to the industry experts, the Stallion Group is currently dictating the pace of progress in the nation’s new journey towards becoming Africa’s next automotive. The company, which is assembling Nissan, Hyundai, Ashok Leyland, Iveco, Honda and Volkswagen along with four other Chinese brands of vehicles, enjoys the largest duty waiver on its high volume of imported vehicles.

The Managing Director, Newsletters Nigeria Limited, Dr. Oscar Odiboh, an automotive consultant, says the auto policy issue has dominated discussions among stakeholders at home and abroad because the fortune and future of the industry is intricately tied to the programme.

Although its annual vehicle demand is put at 400,000 vehicles, industry experts say the figure can rise to one million in a couple of years. PricewaterhouseCoopers has projected that Nigeria’s local production of vehicles may hit four million in 2050.

Pricewaterhouse Coopers Limited, relying on several experts’ views, states, “Nigeria’s potential annual new car market could be as high as four million. However, it currently sits at about 56,000 in a used vehicle dominated market. The NADDC estimates the annual vehicle imports at 400,000 units (100,000 new and 300,000 used) valued at $3.45bn.

“Local production capacity is about 100,000 but the utilisation has over the years dropped to less than 15 per cent. The National Automotive Design and Development Council believe the automotive industry, which currently employs around 2,600 workers, has the potential to generate 70,000 direct jobs and 210,000 indirect ones.”

This explains why the government appears to be undeterred by the barrage of criticisms and powerful lobby against the implementation of the auto policy.

Apart from the timing of the policy, critics of the policy also complain about the seeming poor state or lack of vital infrastructural facilities for the sustenance of local assembly plants.

But government officials, including the Director-General of the NADDC, Mr. Aminu Jalal, have continued to defend the policy, engaging the opponents in dialogues and open debates.

The policy, he says, is designed to encourage local vehicle production against the importation of new and used automobiles through the revival of comatose vehicle assembly plants and setting up of new ones.

And to actualise this, the government raises the import tariff on Fully Built Unit cars to 70 per cent (35 each on duty and levy) from 22 per cent previously charged; 35 per cent duty on the FBU buses and other commercial vehicles. Local vehicle assemblers are granted a zero per cent tariff on Completely Knocked Down (vehicle parts); and five per cent on Semi-Knocked Down components. The assembly plants are also allowed to import twice the number of vehicles being locally produced at 35 per cent and 20 per cent duty on cars and commercial vehicles, respectively, without any levy.

Those opposed to the auto policy are emboldened by the support from pressure groups such as the Lagos Chamber of Commerce and Industry. The LCCI, for instance, says the 70 per cent tariff on imported cars will bring about a higher transportation cost.

Its immediate past president, Alhaji Remi Bello, is quoted in a statement as saying, “Vehicle ownership will be put further beyond the reach of the Nigerian middle class, especially in the face of poor credit access and high lending rates in the economy.”

And as predicted, by the time the policy fully took effect on July 1, 2014 for new vehicles, car prices went up by about 60 per cent, a situation, which made it difficult for many to buy new cars, just as fleet buyers, mostly corporate firms, cut down on the number of vehicles.

Affected car dealers who also contend with high exchange rate have had to adopt different strategies to encourage buyers and boost sales. Only 35 per cent import duty has been placed on used cars. The other 35 per cent levy has not been implemented.

A review of the situation shows that many automobile dealers are apprehensive about meeting their targets for the current financial year due to the increase in prices of vehicles.

This, however, may not apply to the Stallion Group. It may not bother the United Vehicle Assembly Limited (owned by the Dana Group) either, which is currently assembling the Kia brand of vehicles in Nigeria; and other operators of local assembly plants. They are enjoying a considerable slash in import duty on their imported vehicles — 10/five per cent and a zero per cent tariff on the CKD and SKD units, respectively.

Interestingly, Indians own both Stallion and Dana.

The Vaswani billionaire brothers — Sunil, Haresh and Mahesh, control the Stallion Group. Sunil, the eldest, is the Chairman/Chief Executive Officer of the group; Haresh is the Deputy Chairman; and Mahesh is the Group Managing Director.

Mr. Jacky Hathiramani is the Managing Director of the United Vehicle Assembly Limited and the Dana Group.

While Ade-Ojo recalls that Toyota Nigeria has had to cut down on its workforce recently owing to inactivity and poor sales, the Managing Director, Stallion Auto Group, Mr. Parvy Singh, confirms that the firm has not increased the prices of its Nissan brand. This apparently accounts for the reported rise in the Nissan’s market share in Nigeria.

According to the President of Nissan in sub-Saharan Africa, Nigeria, which hitherto had less than six per cent, has hit 10 per cent and hopes to make a 13 per cent mark before the end of the current financial year.

The firm is obviously reaping the benefits of establishing a Nissan assembly plant in Nigeria in 2013. The Stallion NMN Limited, a subsidiary of the Stallion Group, which started with the local assembly of Pajero and Sports Utility Vehicle, has gone into the production of Almera and NP300 and plans to extend this to other Nissan models soon.

The Stallion Group is assembling Nissan, Volkswagen and Ashok Leyland products at the old Volkswagen factory along the Badagry Expressway, Lagos, which it recently acquired and now operates under the business name — VON Automobiles Nigeria Limited.

The firm has also sealed local vehicle assembly deals with the manufacturers of Honda, Hyundai and Iveco brands of vehicles and now uses the same facility in Lagos to roll out new passengers and commercial vehicles, which include cars, buses and trucks under these trade names.

Even as non-vehicle assemblers are complaining of low sales, the business of the Stallion Motors has reportedly quadrupled, which is made possible through the import duty waiver derivable from the auto policy for local vehicle plant owners.

The Head of Commercial Vehicles, Sales and Service, Stallion Motors, Mr. Anurag Alagh, says the firm has produced 600 trucks in just 12 months of operation and hopes to raise this to 1,200 units next year.

The Nissan assembly line alone is said to produce an average of 200 units a month of the Patrol, Almera and NP300 for the local market.

Apparently happy with the performance of the Nissan brand in Nigeria, Whitfield says, “Nigeria is one of the most important markets in our Africa growth strategy, part of which is a strong Nissan dealer network. We intend to increase our market share to 13 per cent during the current financial year, driven mainly by sales in the pickup segment.”

Whitfield recently flew into the country along with the General Manager, Nissan South Africa – African Region, Mr. Jim Dando, to attend the opening of the 11th ultra-modern Nissan showroom in Victoria Island, Lagos.

Dando also says the Nissan team has worked side by side with the Stallion Group to achieve the new market share for the brand in Nigeria; adding, “We have a strong desire to contribute to the rebuilding of industrialisation in Nigeria and be contributors to the growth of the manufacturing sector.”

A spokesperson for Kia Motors Nigeria, Mr. Olawale Jimoh, says the company has in conjunction with its technical partners, KIA Motor Corporation, invested billions of naira in the local assembly plant project and in the process is creating more jobs for the locals and reaping bountifully from the policy.

Industries experts are taking a new look at the auto policy in view of the measures being put in place by the NADDC for its smooth implementation.

For instance, Odiboh says if well implemented, “the policy can take Nigeria from a lower stage to the next level and sit us among top economic nations of the world.” But he warns that unless it is allowed to follow a due process, it may derail.

And in a dramatic u-turn, most of the local players that were initially antagonistic of the policy have not only embraced it but are also stepping up efforts in a bid to retain their market share in the auto industry and possibly capture more.

For instance, Coscharis Motors has rolled out its Ford product, the Ranger, from a local assembly plant located in Ikeja, which is a joint venture with Ford Motor Company. Its President, Maduka, says the company will unveil another vehicle assembly plant in the first quarter of next year as a demonstration of his firm’s belief in the policy and its resolve to remain relevant in the industry.

“I believe in this economy, and to be a true Nigeria, you have to identify with the nation. There is no way a population of 170 million people can live by importing other people’s products,” he says.

Although Ade-Ojo may still be bitter about what he calls ‘emergency situation’ by the policy handlers at the early stage of the project, but he says Toyota has agreed to establish an assembly plant in Nigeria next year. The company plans to start with the production of the Hiace bus, a commercial vehicle.

He says, “There is room for everybody including those who have benefitted and those who did not benefit from the emergency situation.”

According to him, Africa is the next region for development, adding, “Nigeria is the most qualified country in Africa to enjoy the patronage. But those who are coming to invest their money need to be assured that they are not going to lose the money at end of the day. Let us take care so that we don’t fail again.”

Innoson Vehicle manufacturing Company, which commenced the production of buses, pickups and trucks at its Nnewi plant before the auto policy was unveiled, has gone into the production of passenger cars.

A Lagos-based firm, Transit Support Services led by Mr. Frank Nneji of ABC Transport, is producing Shacman brand of trucks and road tractors using the Anambra Motor Manufacturing Company Limited’s facility in Enugu in partnership with Shaanxi Heavy Duty Automobile Import and Export Company of China.

With the return of Peugeot automaker, AP of France, to Nigeria, Pan Nigeria Limited has revived its plant in Kaduna for new models of Peugeot cars.

The Managing Director of Pan Nigeria, Mr. Ibrahim Boyi, says apart from import tariff reduction or waiver for assemblers, “there are other aspects of the policy regarding market development, which need to be implemented. These include the patronage by government and its agencies and low-interest vehicle acquisition scheme for new vehicles assembled locally.”

Mercedes-Benz is another company that has indicated interest to establish an auto factory in Nigeria. The Managing Director of Mercedes-Benz Centre, Benson Uwatse, says the German auto giant hopes to start assembling mini-buses and ambulances in Nigeria next year. Like Toyota, Mercedes-Benz, however, wants the Federal Government to put in place an enabling law to back up the policy.

In what looks like a summary of those on board the auto policy jet, the NADDC says, “The response to the policy so far has exceeded our expectations. The status of implementation of the policy is that 14 auto firms have commenced assembly plants. They are the VON Nigeria Limited, PAN Nigeria Ltd, Innoson Vehicle Manufacturing Nigeria Ltd, ANAMMCO Nigeria Ltd, Leyland-Busan Nig Ltd, NTM Nigeria Ltd and Steyr Nigeria Ltd. They have started assembling new products (cars, sport utility vehicles, buses, pick-up trucks) since 2014.

“Nissan, VW, Hyundai, Kia, Honda cars and SUV, Shacman and MAN trucks and Ashok-Leyland buses are now assembled in Nigeria. And 11 new companies, including Century Auto (Toyota), Tata, Coscharis Auto (Ford, Joylong, Dongfeng), Dana Motors (Renault), Globe Motors (Higer), Leventis (Foton-Diamler), Kewalram-Chanrai (GM, Mitsubishi) have been given bona-fide manufacturing status and are on track to start assembly operations this year.”

For sustainability, Chief Innocent Chukwuma of the IVM and Maduka of Coscharis warn against policy summersault, which sounded the death knell of a similar effort by the Federal Government at developing the local auto sector.

The issue of government patronage might have been taken care of if the promise by Vice-President Yemi Osinbajo at the recent 11th Abuja motor show is anything to go by. “This administration will lead the campaign of buying made-in-Nigeria vehicles through public procurement to stimulate the industry,” he says.

Boyi enumerated a number of other issues that must be addressed in this quest for a sustainable vibrant auto industry. One of which is the enforcement of standards by the NADDC and Standards Organisation of Nigeria “to ensure a level playing field for all operators as well as ensuring quality and safety assurance for the customers.”

Nigeria has the potential of becoming Africa’s automotive hub says a partner at the PricewaterhouseCoopers, Mr. Andrew Nevin. But to fully accomplish this, he says there is need to improve the chances of owning cars, pointing out that available vehicle financing options is very important to encourage patronage of locally assembled cars.

Based on a recent research, Nevin says about 63 per cent of Nigerians cannot afford new cars without some form of support to buy them. The NADDC may be required to expedite action on its discussion with WesBank of South Africa to set up a very low interest finance scheme for the purchase of new vehicles produced locally.

Grey market will also pose serious challenge, according to experts. Nevin says, “Grey market imports are thought to account for half of new vehicle sales in the country. Imports through the grey market are done to reduce or avoid duty payments by declaring false information. With the Original Equipment Manufacturers setting up their operations in the country, it is imperative that similar quality control attained in other developed markets is adhered to locally.”

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