‘Smuggling, others hindering growth of local auto industry’

The Managing Director, VON Automobile Nigeria Limited and Chairman, Nigeria Automobile Manufacturers Association, Tokunbo Aromolaran, recently interacted with the media on a number of issues relating to the nation’s fledgling auto manufacturing sector, the Nigeria Auto Policy, financing system and more. Gboyega Alaka reports.

NEED to support the Nigerian Auto Industry

The automobile industry is huge. Though the better part of it is outside of Nigeria, where we have more sophisticated production and they come up with state of the art items, we as a nation need to support our own industry, if we must develop our own industry. We must support our local assembly plants and local component manufacturers. Together, we (the two sectors) add local content to whatever it is that we are going to bring in. The industry cannot grow if we do not support it; and that is why I say we and the media need to be partners. You have lots of sources for materials. You may decide to be showcasing stuffs only on BMW, Toyota, etc and your pages would still be full, but you may also decide to support the development of the local industry, by focusing on what those of us who are investing in a real tough market are trying to do make us a producing nation.

I say this because we find that there is a big problem of communication gap between us and the general public. Most do not even know that we assemble anything here. And the fault lies with the two of us – we as manufacturers and you the media, because we’re not telling them. It gets very embarrassing that I still get questions like ‘what do you do?’ after six or seven years of being in operation here. We would endeavour to do our bit, but we appeal that you let no week go by without focusing on what local producers are doing, because ultimately, if we develop this industry, the value added and the gains come to us.

The Auto Policy

The industry was redefined by the Auto Policy as most of you know. We have achieved partial success as envisaged when that policy was put together. Partial, in the sense that not all the requirements of the policy have been or is being implemented as it should. When we say it hasn’t been implemented, it has to do with the fact that all the various tariff issues are not being applied. What some institutions fail to realise is that those steps were not taken for nothing. We gave the government instances of what other nations that have developed their auto industry have done to be able to develop it over time. And we indicated that there was need for some protection for the local industry. Various auto producers in their home countries get protection because their countries understand that they need it to grow. India for a long time shut its doors to any foreign cars.  If you cannot drive any vehicle made in India, you walk. And what that did was that all those subsidised cars from China could not come in and displace their own local producers. South Africa did the same thing. They did not place an outright ban, but imposed a 112% duty on all fully built cars coming in. For about seven/eight years, they did not waver and the result was that all the notable OEM (Original Equipment Manufacturers) went and established in South Africa. Today, South Africa has a full auto industry. They can produce everything from ink to the final car, including engine blocks. BMW is there, Mercedes is there, Toyota is there, Volkswagen is there. South African blacks like you and I are on the floors of the factories, producing those vehicles. Nothing says that Nigerians could not do the same.

Discordant tunes within government

Nigeria had about five or six booming auto industries in the 70s; they all died because they couldn’t compete against the imports from China and Southeast Asia. We’re bringing them up again and we’re putting investments in place, but we still need that protection. And that is why the 70% tariff is there. Unfortunately, some section of government are getting very jittery about this. Though the federal government has a long-term view of developing this industry, but its finance system, largely the Ministry of Finance and the Customs don’t see the same long-term vision. They see  just a short term revenue scope, and that is why we get complaints like, ‘Oh the budget of customs this year is not going to be achieved because you have given these guys lower tariffs.’ They are not seeing what we expect to add to the GDP of this country by local production, so they put everything possible in the way to hinder the growth of this industry. Our goods stay out in the port for two to three months and they won’t allow them out because we are enjoying special rate of duties, as conferred by the Auto Policy. In the end, what we don’t pay in duty, we pay in demurrage – because at the end of the day, they don’t want to understand why your goods were delayed. All because one arm of the government cannot listen to the other or understand that all of this is about moving the nation forward.

Somebody needs to educate them that we are going to be slaves to Japanese industries forever and keep their industries running while our own people are looking for jobs. They need to understand that it is not the duties on second-hand cars that will liberate the poor man, but a nice public mass transport system. Second-hand cars only goes to make our own industries difficult to run, because, we in the end, would not be able to produce cars in large numbers, which would bring our prices down.

Smuggling, impeding industry growth, hindering lower prices

One other thing I cannot but mention, is the problem of competition. We are not afraid of competition, but the same customs that complains that the revenue is going down because less vehicles are coming through the ports, is the same customs that allows vehicles to be smuggled in unashamedly. I have said it several times that we are not aware of any auto assembly plants in any of the countries that surrounds us, and do not see why vehicles should come into this countries through our land borders. They made the excuses that our borders are porous, but what that means is that people could as well be coming in through our borders with AK47 every day.

We are all suffering because these smugglers bring in vehicles without paying any duties and  put very ridiculous prices on them. And the government still want our cars to be cheap. We have said it several times that if we can double our production, we are in a position to produce cars whose prices would be able to compete with these second hand cars. And I’ve given the analogy over and over. Whether I produce ten cars or I produce 1,000 units, my overheads are likely the same. NEPA will still come with its N4million bills, I will still pay all my security guards, I will still maintain all the infrastructure here. And that’s why we have insisted that, shut the door against second-hand cars and challenge the auto companies to increase their production and drop their prices. These are issues we need the government to see and hopefully respond to.

‘We are working on an auto finance system for affordability’

Motor vehicles by their nature are capital items. You’ve got to plan for it because it’s in the lower millions, if not higher digits. And so customers need financing to help them spread the cost over an affordable period. Most countries have financial institutions to procure auto vehicles. And that’s part of the problem we suffer. There is a lot of demands out there but the people don’t have the means to procure financing. As such, that demand remains latent and not active. What we’ve been trying to get the government to do is to come up with  a financial institution that will support vehicles that are locally assembled. If people can come up with maybe 20% of the cost of a car and spread the balance over three years; let’s say a car costs N5m, you bring N1m; then we get you a credit financing for the balance over three years. A Nigerian of three or four years standing with a sustainable job should by this method be able to afford a brand new car. We can also link up with your employer to deduct from source. I saw it work in Liberia. You go into the house of an ordinary clerk and you think you are in the house of a minister. And when you ask him, he tells you, ‘Oh, I got it on credit.’ And he didn’t have to personally pay for the items. We want to do the same in the car industry and we’re looking at a cheaper interest rate of say 9 to 11 percent – not the usual 25 percent.

Stallion, ready to fuel economic growth

We have put together a set of commercial vehicles that we know will also support industries and individuals at large. We have a very broad range that ensures that whoever comes around that has a commercial orientation or wants to start a new enterprise, can always find a vehicle that meets their need. Being a commercial vehicle plant, what we’re trying to do is find a solution for small and medium scale, and possibly large scale businesses for their vehicular needs.

KY5/KY10 mini trucks to the rescue

This is why our commercial division of Stallion Motors recently unveiled the KY5 and KY10 light commercial trucks otherwise known as mini-trucks to cater to the growing demand for functional one-ton and two-ton payload vehicles. It is a fulfilment of our commitment to providing affordable cargo vehicles to the emerging small and medium scale sector.

Designed and manufactured in China by Chongqing Changan Kuayue Automobile Co. Limited, KYC trucks are being assembled locally by Nigerians at the Stallion franchise facility in Lagos.