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While the Federal Government has been upbeat about the newly introduced automobile policy, a group known as the Nigerian Economic Vanguard has dismissed the initiative as deceptive
By Pita Ochai
The National Automotive Policy introduced by the Federal Government got a knock despite government’s continued applaud for itself for the alleged successes of the policy. The Director General of the National Automotive Council (NAC), Mr Aminu Jalal had claimed in July this year that the nation’s automobile assembly plants would roll out an aggregate of 300,000 vehicle units within the next two years, which will exceed initially planned installed capacity of 213,000 units under the current industry revival plan by the Federal Government. He also estimated that 23,000 vehicle units of various brands would be produced by the plants between June and December this year.
But a group known as the Nigerian Economic Vanguard (NEV) has described the much taunted success of the National Automotive Policy introduced by President Goodluck Jonathan’s administration in October 2013 as a grand deception. In a recent statement, NEV faulted claims by the Federal Government that the policy would reduce the price of vehicles by encouraging importation of semi-knocked-down (SKD) or completely-knocked-down (CKD) vehicles that will be assembled in Nigeria. “How will the prices of locally assembled vehicles come down when it is a known fact that SKD/CKD units cost an average of 20 percent to 30 percent more than FBU (fully built unit) due to the additional work required by manufacturers to prepare the units? As a result, to bridge the gap in cost of producing SKD/CKD, the government decided to increase tariff on FBU. The increase in cost of procuring SKD/CKD actually implies more drain on our foreign reserves,” it stated.
Abraham Maku, an economist and Secretary of NEV queried how ‘soon’ the so-called locally made vehicles would flood the market and of what quality standard they would be in view of the hasty implementation. “Since the unveiling of the first locally produced vehicles in May, how many vehicles have been produced locally since then? It is, therefore, premature to be congratulating the Federal Government on policy still in its infancy and encumbered by valid contradictions,” he said.
Maku noted that the auto policy would not achieve the desired result because current infrastructure on ground is not ideal for automobile manufacturing. “The planned production of 23,000 vehicles between June and December 2014 implies an average monthly production of 3,286 vehicles which also implies that assemblers should have produced 6,672 vehicles by the end of July. Where are these vehicles,” he asked.
He urged NAC to give details of the total vehicles produced to date since the auto policy was introduced if it is not all about deception. Figures from the ports indicate that Stallion (owners of Hyundai, Nissan, Volkswagen of Nigeria (VON), etc.) imported about 10,000 vehicles between January-June 2014 compared to about 3,000 vehicles imported between January-June 2013 (233 percent increase); the highest rate of any importer in the year. A breakdown of 2013 vehicle importation by Stallion shows a full year imports of about 8,000 units compared to the 2014 half year imports of over 10,000 units (of which their Hyundai 2014 half year import was 6,500 and 2013 full year import was 4,000, Nissan 2014 half year import was 2,700 and 2013 full year import was 2,300), implying that Stallion has enough stock to last till 2015. “Now, if you are manufacturing locally, why import so much at the commencement or just before the commencement of the policy? Other distributors who have claimed readiness to assemble (e.g. Kia, Coscharis, Globe Motors, Kewalrams, PAN etc.) have also imported vehicles in large quantities, hence their consistent advertisement and reduction of prices to liquidate heavy stock and meet several financial obligations,” Maku said.
He explained that almost all the Nigerian auto franchise owners said to be interested in assembling vehicles locally in Nigeria are signing or have entered into technical partnerships with some foreign original equipment manufacturers (OEMs). According to him, entering into technical partnership with foreign OEMs, implies that those manufacturers are not confident of the Nigerian market hence there is no direct foreign investment. “Since the locally assembled new vehicles are not yet commercially available and the implementation of the auto policy is discouraging importation of new vehicles due to 70 per cent increase in import tariff, the scenario has put most Nigerians who want to buy brand new affordable cars in a quandary,” he said.
Maku agreed that the new Automotive Policy is noble in vision, but a subject of hasty implementation, riddled with contradictions that would do the Nigerian auto industry no good. “It appears somehow rash to expect concrete beneficial results from a policy that ought to have been given at least 10 years of incubation before its implementation. The enabling environment is still sorely lacking and the public outcry against the auto policy is enough reason to put its implementation in proper perspective,” he added.
Tochukwu Amali, an automobile engineer, said while the Federal Government is expecting the auto mobile industry to produce 300,000 vehicles units in less than two years of the commencement of the policy, Nissan South Africa that has been in existence for decades and operating in an enabling environment struggles to produce 35,000 units a year while Toyota South Africa Motors struggles to produce 150,000 units a year – using less than full capacity. “Now, how does VON plan to do 23,000 units in 6 months (June – December 2014)? How realistic is this? This shows that the company built up stock at old import rate tariff to sell at “cheaper” prices at the commencement of 70 per cent duty. It is also on record that the most VON ever produced when the Nigerian economy was much better and infrastructure not in its present deplorable state was a little over 25,000 units of vehicles,” he said.
Amali explained that all over the world, auto manufacturers are struggling to keep their factories running while some are closing down their plants: e.g. G.M, Ford and Toyota are shutting down production in Australia by end of 2017 due to the high cost of production. He wondered how the auto policy would yield desired result when it is being hurriedly implemented without putting in place the enabling environment that would make it to thrive.
Since the introduction of the policy, the prices of cars in the country have gone beyond the reach of Nigerians. Prior to the full implementation of the policy, importers paid 20 percent duty on passenger cars and 10 percent duty on commercial vehicles. However, with the full implementation of the policy from July 1, 2014, the total duty payable on cars rose to 70 percent made up of 35 percent Customs duty and 35 percent levy while duty on commercial vehicles rose to 35 percent. This means Nigerians will pay 3.5 times what they were paying before the implementation of the policy.