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China’s car import move tickles Nigerian market

The Nigerian automotive sector was yet to recover from the defusal to assent to the Auto Policy Bill by President Muhammadu Buhari as news filtered in about plans by China to export used vehicles to African countries, including Nigeria. This move has been generating fears and anxiety in the country’s automobile industry.

An automobile communication consultant, Dr. Oscar Odiboh, last week posted a gloomy picture of how auto companies in Nigeria have invested over N2trillion in building assembly plants without getting any return on investment.

According to him, a study of 40 assembly plants with 450,000-capacity in five years showed that all the plants only churned out 15,000 vehicles which is about four per cent of their capacity.

For five years, the assembly plants reposed hope in the auto policy and invested hugely, in anticipation of securing buy-ins from the Original Equipment Manufacturers (OEMs) which have been skeptical in doing business in the auto policy due to absence of legal frameworks in support of their businesses.

The Auto Policy Bill known as the National Automotive Industry Development Plan (NAIDP) Bill with a five-year timeline (2013-2018) hit the brick wall with the refusal of the president to sign it.

It was the masterstroke which jolted stakeholders who expected a favourable business climate to lessen the influx of used automobiles into the Nigerian market.

Year in, year out, the sale of brand new cars has reduced drastically while the second hand market continues to boom. Also, the imposition of 70 per cent tariff on brand new cars and 30 per cent on used cars by the federal government has made brand new cars inaccessible to average Nigerians and at the same time expanded the market for used vehicles.

Daily Trust reports that the ban on importation of used vehicles through the land borders was to discourage used vehicles from flooding the market but the policy, according to experts, has barely achieved the intended motive. Despite the ban, used vehicles are, on a daily basis, being cleared in the nation’s seaports while smuggling activities thrive in land borders.

This is why auto dealers are worried over the plan by China to also join the list of countries bringing used vehicles into the country. While China has already taken over the Nigerian market with many brands like Changan, King Long buses, JAC passenger and light trucks and JAC heavy duty trucks, among others the addition of used vehicles is not going down well with the distributors who are already worried about the influx of used vehicles.

Our correspondent reports that China has already commenced the export of used cars to Africa, Asia and Europe. Nigeria, considered the biggest market in Africa is the destination for the first batch of 300 cars.

Reports indicate that the Chinese Ministry of Commerce has cleared 10 cities to begin the export of second-hand cars to global markets, apparently with a view to driving domestic vehicle sales, which contracted last year for the first time since the 1990s.

Until now, China had been uninvolved in selling used cars abroad, but it now hopes to start benefiting from the booming global used vehicle market which recorded an estimated sale of 39.3 million vehicles in 2017, up 1.8 per cent from 2016 sales, outstripping the 17.1m figure for 2017 new vehicle sales which dipped by two per cent on the 2016 sales figure.

The Marketing Manager of Kia Motors Nigeria, Mr. Wale Jimoh, said the current development would be “disastrous” for the industry.

“It deepens the spread of used cars in the country, making it difficult for auto companies to compete fairly,”  he said.

According to him, the used cars market has already become a menace with Nigeria becoming a junkyard.

“It is already a menace to the industry as it stands, adding China to the list will be disastrous. The industrialisation of the economy will be hindered as  the used cars business doesn’t offer a backward integration to the economy, not to talk of the environmental pollution this portends,” he said.

KIA is a major brand of brand new cars being imported into Nigeria.  The stakeholder added that the used cars business should be rooted in the country’s business cycle.

“All used car business should be a Nigerian used car, not imported. This will allow for a more affordable car ownership experience. The cars will be passed on and the owners can get new ones, thereby improving on the sale of new cars and a more affordable used car market,” he added.

A former Director with the Nigerian Automotive Design and Development Council (NADDC), Mr. Lukman Mamudu, said it is high time Nigeria stemmed the inflow of used vehicles. He said the plan by China should be of grave concern to any nation that aims to grow its automotive manufacturing capabilities.

He said, “With a stock of about 280million registered vehicles in China, its decision to join other countries like Japan, US etc with far less fleet,  to export will be disruptive to automotive industries in countries like Nigeria without strict barriers. As most of these vehicles come off lease, they will be exported at very cheap prices that can potentially undermine the local automotive industry, including the local used car market.

“China is fast adopting electric vehicles and are looking for outlets to get rid of their polluting IC automobiles.  Reducing stock of used vehicles in China will also boost their sale of new vehicles.

“So it a win-win for them.  Without bias to any country including China, I think Nigeria should stem the inflow of used vehicles. The new vehicle industry cannot compete with Used cars, especially grey imports. The industry will die. Our streets nationwide are almost like mega car showrooms. It is really alarming and we are looking on gleefully and wondering about how money laundering happens.

“Mind you, I am not saying that the used cars market is an anomaly,  about 60% of cars sold in America annually are used. But the market is home grown as vehicles come off lease. This is the difference. In Nigeria,  we just import them used.

“The NADDC should pursue the low cost vehicle finance scheme as the best option to increase demand for new cars. It will reduce preference for imported used cars with all their headache, pollution and the fact that they contribute practically nothing by way of employment. In the interim,  SON should insist on certificates of roadworthiness for every used car imported into this country, including from China.  Right now, you can bring any rubbish in,” he added.

Experts believe any move to develop the auto industry must be geared towards curbing the spread of use vehicles and encouraging local assemblers to mass-produce vehicles at affordable rates with flexible payment plans adopted through a robust vehicle financing scheme.

This is why Dr. Odiboh of the Covenant University, Ota, Ogun State, suggested that government should instead increase duty on used vehicles to 70 and 30 on new ones with zero tariff for assemblers with capacity for complete knockdown (CKD) vehicle production.

Adding Chinese used brands to the long list of the second hand vehicle segment, stakeholders agree, will only stifle the industrial capacity of the nation with attendant impact on job creation.

SOURCE: dailytrust