When President Goodluck Jonathan imposed the 70 percent tariff on imported used cars, he never envisaged that the policy would take a toll on Nigerians. Nigeria’s automobile has since then worsened rather than improved.
The policy which was aimed at boosting local production and reviving local assembly plants has not achieved its aim as locally produced cars just control less than 1o percent of the market.
Nigeria’s automobile industry has been affected alongside other sectors by the current economic recession and has had a drastic drop in the sale of cars across the country. The Director-General, National Automotive Design and Development Council, Aminu Jalal, said that the demand for automobiles in the country has declined drastically, falling from the annual sale of 400,000 vehicles to 250,000.
Mr Jalal noted that “For every one percent growth in Gross Domestic Product, the demand for vehicles grows by two percent. But when there is a recession, people stop buying vehicles and the demand goes down. A lot of people will not want to change their vehicles because of the economic situation and you will expect them to keep using such car for a longer period.”
New vehicle dealers are not exempted in the economic crisis as they battled to sell 20,000 units in 2016 compared to total car sales of 250,000 vehicles in the country.
The economic situation has thereby created improvisation by some of the car dealers, namely Kia, Elizade, Coscharis, Lanre Shittu, and Mandillas Motors who have resorted to car swaps and buybacks with customers. Nigerians with used vehicles–popularly known as tokunbo cars in Nigeria–can now take their vehicles to these car dealers and swap their old vehicles for a new one.
How does it work?
Kia motors, which recently launched it “certified used car programme” explained that the used car programme would provide the opportunity for people to sell their old Kia cars or swap them for new models.
Nigerians with used cars could take their cars to these cars, which would hence value the car with a specified valuation model. Cars, after valued, would then be purchased by the dealers or swapped with an additional fee if required.
Nigeria, which aims for self-sufficiency, has had a restraint in its goal due to the state of the economy. The lack of a suitable business environment for local production has slowed the growth the growth of local car production. Some of the major car dealers who had planned to create assembly plants in the country have stalled their production plans because of the high cost of production while the ones producing are not utilising their production capacity. It is estimated that annual capacity utilisation of the auto plants in Nigeria has dropped by 97 percent, from 500,000 vehicles to just a meagre 15,000.
Car sales have been declining and have created the need for these car dealers to find a means of surviving in the current business climate. The Managing Director of Nigeria’s largest Toyota dealer – Elizade Motors, Mr Demola Adeojo said, “What we see today is a shrinking market. In 2014, we had a total size of 50,000 units but the market size has crashed. Market size is going down, while we are increasing market capacity. In terms of population and size, Nigeria should have a viable auto industry.”
The car-swap or buy-back deal is an encourageable business strategy, as it would help more Nigerians to patronise new vehicles as compared to used vehicles. However, with a population of 180 million people, the only sustainable model of car sales would be from a viable local automobile production industry.
