In this interview, the Chief Operating Officer, Autochek, Mayokun Fadeyibi, speaks to JUSTICE OKAMGBA on how the current challenges in the automotive industry present an opportunity for innovation to operators in the space
To improve on its 2013 National Automotive Industry Development Plan, Nigeria recently announced the adoption of another plan covering the period 2023–2033. What can you say about the implementation of the initial plan?
The implementation of Nigeria’s 2013 National Automotive Industry Development Plan had its share of challenges and successes. While the plan aimed to promote local automobile manufacturing, reduce the country’s dependence on imported vehicles, and create jobs within the automotive sector, we could also see its execution in different forms such as the policies related to tariffs and taxes, the infrastructural developments, and a lot more. Overall, we could see positive outcomes with several automakers establishing assembly plants in Nigeria, contributing to localised production and employment opportunities. Additionally, there was increased awareness of the need to support the domestic automotive industry, and this paved the way for the development of a revised plan for 2023 – 2033.
The new plan hopes to migrate vehicles from combustible engines into electric solar-powered engines. Do you think this is achievable?
Yes, it can be achieved. The transition to electric and solar-powered engines is indeed a long-term vision, and currently, the provisions for the required infrastructure are in the planning stage. However, a feasible approach to kick-start this transformation is by encouraging existing fuel stations to begin having designated areas as EV charging units. To achieve this, investment support from stakeholders willing to embrace this sustainable initiative will be highly important. Additionally, the government can play a pivotal role in advancing EV adoption by introducing electric vehicles into public transportation, such as buses. This not only sets an example but also stimulates demand and paves the way for Nigeria to become a prominent adopter of EV technology. Also, the availability of credit.
People find solace in vehicles that come with reliable after-sales services, as it ensures their investment is well-supported. Recognising the growing significance of electric vehicles in the modern transportation landscape, it is essential for the government to also prioritise investments in the training and development of a skilled workforce capable of efficiently managing EV infrastructure, to cater to the sales of EV purchases. This commitment not only promotes the widespread adoption of environmentally friendly transportation but also ensures that the necessary support systems are in place.
The government is offering tax incentives to automotive assemblers and manufacturers. What long-term implications do you foresee for the industry’s growth, affordability, and sustainability because of these incentives?
Firstly, these incentives will stimulate growth in the automotive sector by attracting more investment and encouraging new players to enter the market. This expansion will lead to the formation of a more robust and dynamic industry, fostering innovation and technological advancements. As a result, consumers will have access to a wider range of affordable vehicles with improved features, potentially boosting the affordability and accessibility of automobiles in the country.
Secondly, the sustainability of the automotive industry will be positively impacted by these incentives, with a growing emphasis on environmental sustainability worldwide. These incentives will encourage the production of more eco-friendly and fuel-efficient vehicles, which will, in turn, lead to a reduction in the carbon footprint of the automotive sector, aligning it with global sustainability goals. Additionally, the growth of the automotive industry can create job opportunities and contribute to economic development, further enhancing its long-term sustainability.
The long-term success of the automotive industry will depend on factors like infrastructure development, supply chain resilience, and market demand. Therefore, while tax incentives can have a positive impact, a comprehensive and strategic approach is needed to ensure the industry’s growth, affordability, and sustainability in the long run.
Can you provide insights into how the recent adjustment of the official exchange rate on duties and levies, resulting in a 40 per cent increase in the FX rate for clearing operations, has affected the automotive industry in Nigeria?
Clearly, the increase in the FX rate has resulted in higher import costs for vehicles and automotive components, making it more expensive for dealers and manufacturers to bring vehicles into the country. Therefore, the cost of vehicles has risen for consumers, potentially reducing consumer purchasing power and affecting the overall demand for automobiles. Additionally, this adjustment may have disrupted supply chains and led to delays in the availability of vehicles and parts, further complicating the operations of the automotive industry.
Many Nigerians are keeping their current vehicles longer than planned due to soaring car prices. Could you elaborate on how this trend will affect the automotive market in Nigeria?
This trend could lead to a slowdown in the sales of new cars in the country. With consumers holding onto their existing vehicles longer, the demand for new cars is likely to decrease. This could impact car dealerships, manufacturers, and the entire supply chain, leading to reduced sales volumes, and potentially affecting jobs in the automotive sector.
Secondly, the increase in aging vehicles on Nigerian roads could result in a higher demand for vehicle maintenance and repair services. This will present an opportunity for the aftermarket automotive industry to thrive, including mechanics, spare parts suppliers, and service centres. However, it could also mean that consumers will spend more on maintaining their aging vehicles, which may affect their disposable income for other expenditures.
The removal of fuel subsidies has added to inflationary pressures, affecting the cost of running vehicles. How has this impacted consumer preferences and choices regarding vehicle purchases in Nigeria? How will this impact the automotive landscape, going forward?
The Nigerian government’s policies and regulations regarding fuel pricing and subsidies will continue to play a crucial role in shaping the automotive landscape. Future adjustments because of the removal of fuel subsidies, and the implementation of alternative energy incentives will further influence consumer choices and the types of vehicles available in the market. Many consumers, particularly those with lower incomes, have felt the pinch of higher fuel prices, which has led them to reconsider their choices when it comes to buying vehicles. The demand for more fuel-efficient vehicles, such as smaller cars and hybrids, has seen an uptake as consumers seek to reduce their ongoing fuel expenses. Additionally, public transportation options, such as buses and trains, have become more attractive to some, as they offer a more cost-effective alternative to owning and maintaining a personal vehicle.
Looking forward, the impact of the removal of fuel subsidies on the automotive landscape in Nigeria is expected to be multifaceted. Vehicle manufacturers may respond to changing consumer preferences by introducing more fuel-efficient and affordable models to cater to the market’s needs. However, it’s important to note that the overall demand for vehicles may slow down, particularly for larger, less fuel-efficient models. In a nutshell, the long-term impact on the automotive landscape will depend on a combination of market dynamics, government policies, and consumer behaviours.
Considering the challenges of car ownership in the country, what strategies do you recommend for consumers, manufacturers, and other stakeholders to navigate and thrive in the current automotive market in Nigeria?
To mitigate the impact of higher import costs, consumers should consider utilising financing options, as these solutions make purchasing vehicles more accessible and affordable. The government should prioritise supporting the growth of EV infrastructure including charging stations and the set up of aftermarket care centres by manufacturers. This will ensure customers enjoy driving their EVs and afford them a longer life cycle for their vehicles.
Also, Nigerians should be encouraged to explore and embrace fuel-efficient cars. This involves raising awareness about the benefits of such vehicles and educating consumers on how they can save money on fuel expenses. At Autochek, we offer tailored financing packages that cater to the specific needs of individuals and businesses who apply for auto financing. Courtesy of our partnership with other financial institutions, we provide our customers with multiple loan offers whenever they apply for auto loans. These packages address challenges related to affordability and access to car financing.
How can the automotive industry in Nigeria leverage these challenges as opportunities for innovation, sustainable practices, and growth?
Engaging in the production of affordable and reliable locally manufactured cars has the potential to diminish import reliance while simultaneously fostering economic growth and job opportunities. Embracing sustainable practices like the adoption of cleaner, energy-efficient technologies, including electric vehicles, not only addresses environmental concerns but also positions Nigeria as a significant participant in the global transition towards eco-friendly transportation. Furthermore, investing in essential infrastructure to support the widespread use of EVs is crucial to ensure the success of this sustainable transformation.
Could you discuss any initiative that your firm is implementing to adapt to the changing dynamics in the country’s automotive industry to support both consumers and the industry as a whole?
Certainly, to adapt to the evolving dynamics in the Nigerian automotive industry and support consumers and the industry, we offer multiple loan choices to facilitate their needs. Similarly, we recently introduced a financing program for dealers. This initiative eases their cash flow and allows them to import more cars which is growing their dealerships. The expansion in importation capabilities is contributing to the diversification of the automotive fleet, presenting a broader array of vehicle options for customers to select from, thus enhancing the overall automotive experience in Nigeria.
