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Nigeria Autos Report Q2 2008Published by: Business Monitor International Published: Apr. 30, 2008 - 42 Pages Table of Contents
AbstractNigeria’s automotive industry will continue to require government support following privatisation if it isto survive and grow, according to BMI’s latest Nigeria Automotives Report.Carmakers Peugeot Automotive Nigeria (PAN), Mercedes bus and truck manufacturer ANAMMCOand Volkswagen of Nigeria (VWoN) are all now in private hands. However, BMI doubts that the newowners will be able to bring production to anything near capacity without sustained assistance. The sizeof the domestic market does not justify the level of installed capacity. Nigerian car plants will need togenerate interest from foreign partners to inject new capital and extend their reach to the rest of Africa.This will depend on Nigeria’s overall business climate, which is improving. Unless the new plantmanagers can improve efficiency and cut costs, the future of these assembly lines will remain dim. Astable automotive market for local assemblers is also necessary for forward planning, and this can only beguaranteed by restricting imports, either through raising tariffs or the imposition of non-tariff barriers.Yet, Nigeria’s automotive industry has plenty of unrealised potential. At present, capacity utilisation inthe industry stands at just 10%, while 70% of materials used in production are imported; Nigeria’sautomotive capacity includes 108,000 cars, 56,000 commercial vehicles, 6,000 tractors and 1.2mnmotorcycles. In a move that promises to help enable Nigeria to reach its potential, the VWoN vehicleplant indicated in January 2008 that it could recommence production. Barbedos Ventures, which won acontrolling stake in VWoN in 2006, hopes to restart production at the plant with the assistance of lowinterestloans from the Auto Development Fund, managed by the Bank of Industry (BoI), and various taxwaivers and reductions for industries in economically disadvantaged areas, for research and developmentand for industries with high labour to capital ratios. Sources now claim that the new owners have plans tobring the plant back into operation, which will begin with the import of completely built units (CBUs).Machinery at the plant will be reconditioned, enabling full assembly to follow. The installed annualproduction capacity of the plant is 39,000 units, which if achieved would triple the industry’s currentoutput. In Q108, BoI argued for a broad range of trade protection measures and subsidies to build automotiveindustries. Specifically, BoI is calling for exemptions from antitrust statutes, industry-specific assistanceto enhance the use of new technology and restrictions on imports of CBUs, but also advocates duty freeimports of automotive parts for use in assembly. The intervention by BoI on the future of the recentlyprivatised Nigerian automotive industry will be welcomed by the country’s carmakers, which have calledfor government intervention to bring mothballed plants back online. BMI also believes that thegovernment needs to support the automotive industry to assist new car plant owners in a post-privatisationenvironment. Get Full Details About This Report >> |
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