With an already impoverished Nigerian middle class left without the purchasing the power to acquire new vehicles, there are fears among some concerned stakeholder in the local automotive market that, following the fall in global oil prices triggered by the spread of the Coronavirus endemic, that showrooms and stock yards for new vehicles may soon be empty in the following weeks and months.
The impact of the deadly coronavirus scourge is in one way or the other negatively affecting various aspects of the economy in Nigeria including the market for vehicles as the apprehension and confusion generated by the disease rages.
In a telephone conversation with BusinessDay on Monday, Thomas Pelletier, managing director/country delegate, CFAO Automotive Group while stating that there is not much impact felt yet, said that, the effect of what is happeing currently around the globe should be of serious concern to the global automotive industry.
According to Thomas Pelletier, ‘’No much impact yet, but we expect volatility in freight cost and some shortage of components to original equipment manufacturers (OEMs) that affect production’’. The implication of this is that the cost of foreign exchange will be high and its accessibility may be very difficult.
Responding to enquiries on proactive steps that the local automotive market should take if the situation lingers, the CFAO boss said, there are none unfortunately describing the situation as beyond anybody’s control.
He said the good news is that, the virus seems to be under control in China from where it originated from. He expressed hope that it should be done with in Europe in the next one month.
On the sharp drop in oil prices and how it will affect the automotive business, Thomas Pelltier described the impact as a huge and major one that may affect the auto market tremendously if foreign exchange becomes scarce again.
Kunle Ade-Ojo, managing director and chief executive of Toyota Nigeria Limited while expressing his views on how the coronavirus disease would affect automotive businesses in Nigeria disclosed that it is mainly on new production and shipments of automotives and spare parts already ordered.
On fears of possible increases in prices of new vehicles in the wake od dropping oil prices, the Kunle Ade-Ojo simply responded, ‘’We are studying the situation and would react accordingly as events unfold. Oil price drop will only affect the industry if there is devaluation of the Naira. Prices of vehicles will go up and this might affect sales and the over all market size.
Oil tumbled 31 percent in a matter of seconds overnight on Sunday, representing the sharpest decline ever since the Gulf War in 1991. The losses are being fueled by sinking demand due to coronavirus concerns, which has in turn sparked a series of price cuts.
Saudi Arabia slashed its prices by the most in at least 20 years over the weekend. A price-cut free-for-all has broken out globally following the collapse of an OPEC+ alliance last week.
Exactly one year ago, there were about 11.8 million licensed cars on Nigeria’s roads as at Q4 2018, compared to 11.6 million in the corresponding period of 2017 with commercial vehicles holding about 58.08 per cent of the number.
The size of the imported vehicle market in Nigeria is currently estimated at N1.2 trillion (approximately $3.3 bilion), and about 70 percent of this are second hand vehicles, also known as tokunbo.
With a new car policy imposing a 35 percent import tariff and another 35 percent as levy, market watchers still believe that used car market is still thriving despite the closure of its land borders with other neighbouring countries since last year.
