Stakeholders hopeful of better auto fortunes in 2018
*As sales drive down to four-year lows
Notwithstanding that Year 2017 was rather bumpy for the auto sector, experiencing the worst sales in four years, stakeholders, including manufacturers and dealers are optimistic that the current financial year herald better fortunes.
At the twilight of 2016, stakeholders in the industry were enthusiastically hopeful that 2017 would transcend the previous year’s performance, but these expectations were dashed, as the year ended, leaving much to be desired. To enable them overcome the challenges, stakeholders called on the Federal Government to implement an effective policy that will govern the establishment of automobile industries in Nigeria. This will act as a palliative, while also strengthening the imposition of high tariff on the importation of vehicles.
The Principal Partner, Media Advocate Limited, a marketing communications and automotive resource enterprise, Manny Philipson, without applying any brakes, described the automobile industry as precariously haemorrhaging, owing largely, to government’s neglect, policy summersaults, and undue taxation that have left the industry worse-off year-on-year.
He said it was regrettable that less than 10,000 units of new vehicles were sold last year in a country of over 150 million people, with a bourgeoning population of young and able workforce currently estimated at over 50 per cent of the country’s inhabitants.
Philipson disclosed that from a combined sales of 50,000 new vehicles (using 2014 statistics), sales plummeted to 14,500 units in 2016, and by the third quarter of 2017, sales had sloped downwards to less than 10,000 units, the worst result in five years.He recalled that restriction of vehicle imports through the land borders in December 2016, was anticipated to boost new vehicle patronage, but hopes were dashed by the sudden hike in tariffs from 22 per cent to 70 per cent coupled with the paucity of foreign exchange (forex) deprived new vehicle marketers of the anticipated benefits from the ban.
Besides, Philipson noted that local vehicle assembly plants were equally devastated, as they couldn’t access forex to import completely knocked down components to get their lines running, and eventually resorted to laying-off workers to save cost, regardless of the consequences.The result, he said, is a total decline in the combined outputs of the plants with attendant decline in the imports of fully-built-up units, and subsequent upsurge in showroom price of new vehicles – a scenario that incapacitated patronage.
According to him, prices of commercial vehicles especially commuter vans used for transporting commuters over long distances have similarly witnessed sporadic increases in unit price. Transporters, to this end, can’t re-fleet their pool of buses like they did in the past. The buses are now overstretched such that they become susceptible to damages that could result in either protracted downtime or accidents.
Philipson said: “At the implementation of the National Automotive Industry Development Plan (NAIDP), in late 2014, tariffs suddenly surged from 22 per cent to 70 per cent (for passenger cars) and from 10 per cent to 35 per cent (for commercial vehicles); There haven’t been a corresponding rise to 70 per cent for used vehicles, but 35 per cent duty is charged on such imports, a disparity that has been challenged by local vehicle assemblers.”He noted that the NAIDP blueprint could be heading for uncharted waters, unless urgent measures are put in place to rescue the project.
“But the government dare not allow the project to fail, having painstakingly invited various FDIs (foreign direct investments) to stake their hard earned funds in establishing assembly plants in Nigeria,” he added.
Similarly, the Chairman, Motor Vehicle and Miscellaneous Assemblies Sectoral Group, of the Manufacturers Association of Nigeria (MAN), D.V.C Obi, condemned the NAIDP, saying: “We have been struggling to revive the auto industry; it is a shame that up till now, nothing has been done about local content.”
Obi argued that any country that claims to manufacture, produce or assembly automobile without local input is not heading in the right direction.At the maiden Nigeria Annual Automobile Award (NAAA) Conference, organised by Automobile Search Nigeria Limited, in Lagos, in December, Senator Ben Murray-Bruce, noted that in the automobile industry, the government is giving Nigerians no plan and no direction.He said the automobile policy existing in Nigeria today is a 50-year old policy, which makes no sense, and called on government to implement a policy that will regulate the industry and also allow Nigerians to drive a brand new car at affordable rate.
He further urged government to embrace electric cars for Nigerians, as it is cheaper to maintain and drive.Also assessing the sector in retrospect, the Manager, Sales and After Sales, Honda Manufacturing Nigeria Limited, Olabade Badejo, noted that the recession of 2017 still bites very hard regardless of the economy’s exit. “The buying power of Nigerians did not increase, and prices of automobile brands went up more than 300 per cent,” he recalled.
As a result, Badejo argued that it was impossible for the sector to recover from the downturn, as “Dealers didn’t sell as much volumes as they did in the past. Overall in 2017, the auto sector didn’t have impact positively on the economy, not just because of the recession but even with the policies of government in encouraging local production, which caused a lot of higher duty rates.”
The Marketing Manager, Dana Motors Limited, Jimoh Olawale, said year 2017 was a mix of challenges and hope for the auto industry, saying the economic recession, which ravaged the whole of 2016, down to the first half of 2017, was accompanied by low stock, and lower car sales amid low purchasing power of the people.
While these challenges are not peculiar to the auto industry alone, Olawale noted that the record low sales in the country affected many operators in the industry, which was compounded by banks’ reluctance to roll out vehicle finance schemes owing to the economic instability and high inflation rate in the country.
“As a major stakeholder with an unalloyed commitment for the industrialisation of the economy, Kia remains resolute in its confidence that the industry will take a better turn.“Flowing from this belief, and thanks to the government’s resolve to change the tide of the economy, the country is set on the path of full recovery from the hitherto deepening recession, thereby ushering some ray of hope for the industry. “The second half of the year presented a better buying power that rekindled the industry’s sales volume,” Olawale said.
The General Manager, Marketing and Corporate Communications, Coscharis Group, Abiona Babarinde, said: “In 2017, our challenges were generic in terms of the country and economy that we found ourselves struggling to come out from the recession, which definitely affected all businesses in every sector.
“We are not immune to the challenges, but the good thing is that we were able to turn the challenges to opportunities as a business and brand. Year 2017 challenges for Coscharis were turned to survival opportunities, and grow the brand positioning,” he said.He added that: “looking at some of the indices – inflation rate, or foreign exchange, we are not immune to some of these macro-economic factors, but the beauty of it is, we were able to weather the storm, build and consolidate on our leadership role as a brand.”
With regard to how to manoeuvre these rough terrains prevalent in the industry and charting a way forward in 2018, Philipson said the prospect is to look inwards and re-jig the NAIDP blueprint; encourage stakeholders creating an accessible pool of forex.He also encouraged government to partner with financial institutions both home and abroad, to fund and support vehicle acquisition schemes, and essentially, firm up the naira against major world currencies.
For Badejo, “2018 is geared to the general election, so we expect that government’s spending would increase in preparation for the election, which will also impact positively on the economy. Some people would benefit and would be able to purchase vehicles, even government that were cash trapped last year.
“We expect these to impact on the industry, but still, the market really shrunk in 2017, and I don’t expect it to bounce back immediately until for another two and half years; that is the trend we have seen when such intervention happens especially in the auto industry,” he disclosed.Obi on his part, advised government to get serious and reorganise the sector, so that domestic plants in Nigeria can start assembling vehicles properly.
For Babarinde 2018 is all about business repositioning, saying: “For us at Coscharis, we wish to push our brand to the point of giving back satisfaction to our customers especially with emphasis on after sales services. This is because the fact remains that when the purchasing power of the market is diminishing, and with the high cost of owning a new car in our own area, which is premium, we are positioned to continue to satisfy our luxury line.
“In terms of satisfaction to our luxury segment, we are poised to deliver that value and that is why we would always want to chunk out new variants,” he said.
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