By Akan Inyang.

Nigeria undoubtedly has the potential to be the world’s most vibrant automobile manufacturing hub. The frustrated efforts of the past may have eluded the Nigerian automobile industry from growing at the pace of the global auto-scene; but nonetheless, there are lessons ought to have been learnt from the past. In as much as there is a pressing need to create more jobs through automotive industrialization, what really drives this industry is a ready market (willing buyers of manufactured products) and also for this to be sustained, there has to be fair competition.

Taking our minds back to 1998-2002 or slightly before then, I am very sure a few rugged, yet locally produced set of buses that will come to mind are Mercedes Benz 1414 and 1418 commuter buses produced by ANAMMCO (Anambra Motor Manufacturing Company Limited). According to an old worker of this firm, during the peak periods of active assembly, up to 900 of these buses were produced annually. But unfortunately these buses are now a thing of the past because overtime their body designs were not improved upon and hence couldn’t compete with better options loaded with more passenger comfort packages and larger load compartments. It pains me to see Marcopolo, Irizar, Tata and the rest of them flooding our city and inter-state routes when we had buses we should have improved upon; but this is a clear example of how far government funds can go in pushing a non-competitive product to the open market and creating false jobs in the process. So what is a guaranteed option to make sure the Nigerian automobile industry is sustainable now and in the near future? Starting small!

According to SON (Standard organization of Nigeria) more than 95% of automobile spare-parts are imported and also we still have utility automobiles like mini-garbage dispensers (TATA), tricycles (keke-napep) and motorcycles(okada) still imported and assembled. As it stands now, it’s ill-advised to be looking big by talking about passenger car manufacture because we still have pressing issues with our standards control and price moderation. Starting small has many benefits, one of which is building ‘investors’ character’ and making them adapt to creating highly marketable products primarily based on the core needs of the Nigerian automobile market which is very advanced even with our deficient industry.

Why this approach is necessary is because we don’t want an industry that will be wholly reliant on government funds to cover up avoidable losses overtime. So what am I suggesting categorically? Instead of increasing tariffs on fairly used imported vehicles, why not completely ban the importation of small automobiles- which can easily be manufactured locally based on the industry’s current capacity- and also raise tariffs for imported spare-parts as a sure way to force OEMs (original equipment manufacturers) and after-market parts producers to set-up industries for their products that already have a huge demand. Besides it’s much easier checkmating standards of locally produced parts because from the manufacturing processes and quality control in place, one can predict what the final product will look like.

Also we ought to be seeing more strategic tariff regimes like the earlier approved 0% import tariff for CKD (completely knocked down) components of mass transit buses with a minimum capacity of up to 40seats which unfortunately, more than 5years down the line , Ashok Leyland buses (which local assembly began in 2011) used for the BRT (bus rapid transit) scheme in Lagos haven’t really improved to take advantage of such waivers. This makes me wonder how and when they plan to compete and go mainstream.

To take this analysis a little further, here is a more structured breakdown of the many benefits of starting small, growing strong and steadily:

1) It’s easier to get investors: if only the entry barriers are eliminated through enforcing the right policies to support industries manufacturing smaller products which will end up creating more jobs and a sustainable industry. Just like GSM in Nigeria, the operators won’t complain much about power because they are making profit to comfortably offset their operating costs.

2) Strengthening after-sales support delivery in Nigeria: which currently is really poor and can even be a threat to any emerging industry if not well in place. I’d rather buy a locally produced shock-absorber with warranty rather than buy imported KYB shocks with no transferred warranty; that’s if I manage to get the original KYB shocks. This is because there is a locally existing company to hold responsible when things go wrong.

3) Lower entry risks with ready market: [/b]because many fear government policies may not be in their favour when government changes hands. But with the right policies (early) in place, companies can survive even if the subsequent government turns its back on them because they have Nigeria’s teeming market behind them.

4) [b]Don’t forget our neighbours look up to us: like Benin,Togo, Cameroun, Niger etc, are import driven economies which remain a huge market potential; the smart thing to do is to leverage on this market by exporting.

5) Taking out time to set-up more checkmating policies: because Nigeria has peculiar problems and we need to under-study the industry as it grows. For example, who ever imagined years back that accident vehicles from US would be a huge business and problem to Nigeria today? Starting big means having to shoulder bigger problems that will definitely crop up.

6) Creating cheaper future supply chain: which is key for any mass production facility seeking to optimize profits and with this in place, Nigeria will be attractive to more robust investments in the future.

7) More strategic tariff regimes can be rolled-out: partly based on segment performance and other industry indicators as the industry steadily grows instead of making policies based on inaccurate and faulty future projections and analysis.

Kick-starting recycling and Re-manufactured spare-parts business:because Nigeria-which unfortunately is a third world nation-probably has enough scrap to kick-start an entire auto-industry. Recycling is big business, for example Renault trucks offer REMAN spare-parts as a standard after-sales option and rethreaded tyres are safe to use as well.

I want to use this medium to encourage more investments in the local manufacturing of spare-parts and the provision of standard after-sales support because you can’t go wrong offering quality services for a product there is already a demand for in Nigeria. Also the government of the day should desist from this top-to-bottom approach and ensure a truly sustainable automobile industry via truly favourable policies.

source: http://autobaseafrica.com/nigeria-auto-industry-needs-to-start-small/