Nigeria’s automotive industry that has been largely import dependent has been fingered as new investment area that would attract investors for local production and assembling.
With the country’s huge population estimated at 170 million and over 40 million within the growing middle class, PWC projects that with continued government support, the Nigeria auto industry will begin actual manufacturing with components sourced from within, potentially generating over 6 million new cars locally by 2050.
Consequently, imported used vehicles popularly referred to as Tokunbo cars will become non-existent as a direct result of local production.
This projected growth requires sustained and effective investment in the auto industry made only possible by the government implementing political, economic and legal policies that create a suitable environment for such investment, a PwC report released weekend said.
Andrew Nevin, advisory partner and chief economist, PwC Nigeria presenting a report titled “Africa’s Next Automotive Hub” said the global automotive industry is looking for new growth opportunities and those opportunities reside in Africa.
“Nigeria, the continent’s largest economy and by far the most populated presents huge opportunities for investors in the automotive space.”
“The new auto industry plan which raises import duties on imported cars makes the used car market less attractive. While this encourages the setting up of assembly plants in the country to serve the domestic market, the country may also become a regional hub for West Africa.
He said beyond assembling, the industry presents other opportunities. There are existing gaps in the repair and servicing aspects of the industry which will become even more obvious with increased local manufacturing, so plugging this gap will require capacity building, training of skilled labour and adequate supply of spare parts, Nevin stated.
“Other business opportunities which the industry brings include the supply of equipment to domestic assemblers, supply of components and the setting up of local component manufacturing plants.” The vehicle distribution system and how vehicles get to the market also need to be restructured and therein lays opportunities for many players.”
He however observed that getting Nigerians to patronize made in Nigeria cars, requires auto financing options to be readily available with terms that are convenient and favourable to people of all income classes.
“In addition, as more corporate shift towards vehicle leasing and fleet outsourcing, a huge opportunity opens up the fleet and leasing business which promises very impressive returns.
While outlining challenges including cost of doing business, infrastructure and power gap, corruption and layers of administrative bottlenecks as well as issues of insecurity in Northern parts of the country, he said “The challenges and uncertainties notwithstanding, investors might wish to take note of the fact that this is a country of over 170million people which has been growing at almost 6 percent p.a over the last 5 years.
“This population currently buys around 56,000 new cars yearly but an increasing number who are young and upwardly mobile are joining the middle class with disposable income which they are willing to spend on good cars. Someone has to provide the mobility for these people by selling cars to them.” “Those who participate in this opportunity of solving this challenge either directly by making the cars or providing support in the value chain are certainly in for some good business.”
Nigeria’s automotive assembly is still in its infancy. In 2014, local assembly accounted for approximated 15 percent of total vehicle sales. The only type of manufacturing currently being carried out in-country is Semi Knocked down (SKD) and this is led by three companies: VON Automobile, Peugeot Nigeria and Innoson motors.
However, several other industry players have announced plans, following the announcement of the new automotive policy to commence assembly in the country. Currently more than 30 companies have received licenses to assemble cars in Nigeria.
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