… as auto dealers groan under tariff hike
- Re-jig NAIDP’s blueprint, experts advise
Automobile business in Nigeria is witnessing what observers call ‘its worst moment ever’, as car sales dropped by 80 per cent within four years.
A perusal of some data of the National Automotive Industrial Development Plan, by our correspondent, indicated that the seeming craze for car purchase had declined sharply at the end of 2017.
Despite the nation’s burgeoning population of a young and able workforce, which makes up 50 per cent of the nation’s about 200 million inhabitants, findings revealed that units of cars bought across the country dropped from 50,000 as at 2014, to 8,000 units
in 2017.
If we add everything we pay, like Value Added Tax and other taxes, you’ll discover that the vehicle importer pays as much as 85 per cent duty on a single car. For instance, we pay as much as N15 million on one Land Cruiser vehicle
From a combined sale of 50,000 new vehicles as at 2014, sales further plummeted to about 25,000 units in 2015; 14,500 units in 2016, and by the end of 2017, sales had dropped to less than 8,000 units, the worst in the last four years.
Meanwhile, the annual import vehicle figure before 2014 was between 50,000 and 100,000.
For instance, Toyota Nigeria Limited, a major stakeholder that controls over 30 per cent of the market share, imported 3,500 units of vehicles as at the end of March, 2016 but imported only 350 units of vehicles in the first quarter of 2017, its poorest haul in 10 years.
TARIFF, INTEREST RATE KILLING BUSINESS- AUTO DEALERS
The Chairman, Nigerian Automotive Manufacturers Association, Mr. Tokunbo Aromolaran, attributed the dwindling fortune of the sector to the snail speed in the implementation of policies. He also blamed the dip on hiked tariff and high-interest rate in the country.
“The Federal Government should ensure we have a condusive and stable environment. We also require it to have a proper buy-in into the policy such that it can help put all fiscal controls in place.As for us as industry operators, we should ensure that we act according to regulations on car importation and deliver standard products in the interest of the economy, users’ safety and satisfaction,” he told The Point.
Findings also revealed that at the outset of the implementation of the National Automotive Industry Development Plan in 2014, tariffs surged from 22 per cent to 70 per cent (for passenger cars), and from 10 per cent to 35 per cent (for commercial vehicles).
This affected the sale of new cars, unlike its used counterparts, as the situation made several Nigerians prefer fairly used vehicles – also called ‘tokunbo’- to new ones.
The disparity, according to the NAMA boss, has been challenged by local vehicle assemblers.
Aromolaran added that the NAIDP blueprint could be heading for uncharted waters unless urgent measures were put in place, to rescue the project.
According to him, the restriction of vehicle imports through the land borders in December 2016, was anticipated to boost the patronage of new vehicles, but assemblers’ hopes were dashed by the sudden hike in tariffs from 22 per cent to 70 per cent, coupled with the paucity of foreign exchange, depriving new-vehicle assemblers and marketers of the anticipated benefits from the ban.
Meanwhile, the Managing Director, Toyota Nigeria Limited, Mr. Kunle Ade-Ojo, has expressed the belief that the poor sale and import-figure of vehicles are traceable to the high-interest rate and high duty being paid by automobile companies in the country.
“The economic shortfall hiked prices of vehicles and crippled the purchasing power of many buyers and has been affecting our operations in the last few years.
“With the recent efforts made by the Federal Government to tackle the FOREX (Foreign Exchange) challenge, the sector has not seen positive results, as vehicles were being overvalued by the customs officials at the ports of entry.
“If we add everything we pay, like Value Added Tax and other taxes, you’ll discover that the vehicle importer pays as much as 85 per cent duty on a single car. For instance, we pay as much as N15 million on one Land Cruiser vehicle,” he lamented.
The General Manager, Marketing and Corporate Communications, Coscharis Group, Mr. Abiona Babarinde, however, admitted that the economic challenges were generic, as the firm managed to scale hurdles it faced in 2017, which affected its sales.
“Looking at some indices like inflation rate and the foreign exchange rates, we are not immune to some of these macroeconomic factors; but the beauty of it is, we were able to weather the storm.
“The fact remains that, when the purchasing power of the market is diminishing, and with the high cost of owning a new car, it affects businesses,” he said.
RE-JIG NAIDP BLUEPRINT- EXPERTS
However, automotive resource consultants have tasked the government to re-jig the NAIDP blueprint and encourage stakeholders by creating an accessible pool of FOREX, if it is determined to boost investors’ confidence in the automotive sector of the economy.
The Managing Partner, Prompt Consult, Dr. Olusegun Banjo, emphasised that it was time for the government to partner both local and foreign financial institutions to fund and support vehicle assembling and acquisition schemes in the country.
He said, “Most local vehicle assembly plants were devastated, as they couldn’t access FOREX to import vehicle components, and eventually resorted to laying off workers to save cost, regardless of the consequences.
“The result of such predicament is a total decline in the combined output of the plants with an attendant decline in the imports of fully-built-up units, and subsequent upsurge in showroom price of new vehicles, a condition that incapacitated patronage.”
Another resource person, who retired from Volkswagen of Nigeria, Mr. Anthony Okereocha, explained that the prices of vans used for transporting commuters over long distances had similarly witnessed a sporadic increase.
“This prevented transporters from changing their buses like they used to, before 2014. The buses are now overstretched such that they become susceptible to damage that could result in either protracted downtime or accidents,” he said.
But going forward, Banjo expects the government’s spending to increase in preparation for the 2019 election, which will also impact positively on the economy.
According to him, some people will benefit and will be able to purchase vehicles for elections. “Though, operators should not expect a rebound until 2020 or more because that is the trend we have seen when such intervention happens, especially in the auto industry,” he added.
