July 10, 2016

Auto policy summit: Dealers differ on imported used cars

Auto policy summit: Dealers differ on imported used cars

*Zahav auto assembly line in Ikotun Lagos

There is a saying that when  two brothers come out from a meeting, frowning, they must have told each other the bitter truth. This was exactly what happened recently at the Oriental Hotel, Victoria Island, Lagos, venue of the one-day stakeholders’ forum on the Nigerian automotive industry.

The event  put together by the Nigerian Economic Summit Group has the theme Setting an implementation agenda for the national automotive plants. The forum discussed the way forward for the Nigerian Automotive Industry Development Plan, NAIDP, with the main objective of eliminating existing limitations in implementation process.

Present at the event were Minister of Industry, Trade and Investments, Dr. Okechukwu Enelomah, the Director General of National Automotive Design and Development Council as well as chieftains in the automotive industry, like Chief Michael Ade-Ojo of Elizade Group, William Anumudu of Globe Motors, Cosmos Maduka of Coscharis Group, Ibrahim Boyi of PAN Nigeria Ltd, and a host of others.

In his opening speech, the Chief Executive Officer of the Nigerian Economic Summit, Laoye Jaiyeola, noted the importance of the auto sector to the nation’s economic development.

According to him, the choice of the automotive industry as one of those targeted for diversification of the economy is predicated on the potential of the industry to play a strategic and catalytic role in economic development in the area of employment creation, GDP contribution, SME development. Automotive parts, components and services, skills development and the acquisition of technology other areas are the sector can also boost the economy.

He regretted that though the size of the automobile market in Nigeria is worth over four billion dollars annually, it does not translate into anything meaningful for the country characterised by importation.

So the forum was challenged to leave no stone unturned in proffering solution that could make the policy work.

Jaiyeola  reminded the participants that the success NAIDP does not only have implications for the development of small and medium enterprises, but ultimately offers the opportunity  of Nigeria moving significantly on the Doing Business rankings or indeed the WEF competitive rankng.

The discussant which includes The Managing Director of PAN Nigeria Ltd, Ibrahim Boyi; Managing Director of Toyota Nigeria Ltd, Mr. Kunle Ade-Ojo, Dr. Cosmas Maduka of Coscharis Group, Thomas  Pelletier, Managing Director CFAO Automotive, Tokunbo Aromolaran, Managing Director of VON Automobiles Ltd, expressed their views on the ban of imported used vehicles, tariff increase, closure of land border.

Setting the debate in motion, the  Minister of Industry, Trade and Investment, explained  that President Muhammadu Buhari’s administration does not only believe in the auto policy but is also determined to make a success of it.

While the stakeholders agreed on the importance of having a robust auto policy, one issue they expressed divergent views was  imported used vehicles, which control a chunk of the nation’s auto market.

Mr. Ade-Ojo,  noted that placing a ban on imported used vehicles should not be the first thing to do.

In his views: “We are importing used vehicles, because local assemblers are not able to meet up the volume of vehicles required by the consumers at the price they can afford.

“My take, therefore, is that rather than keep looking at placing a ban on imported used vehicles, we should try to build local content, which is the only way the fruit of the auto policy can be reaped.

“Right now, everything is imported. If we can make the tyres, batteries and other parts locally, all of us will be able to use them. What we are doing at the moment is mere assembling, which contribute very little to the economy,” he said.

Meanwhile, Coscharis chairman, Dr. Maduka, maintained  that Nigeria has no reasons importing used vehicles, which in his view, amounts to working against the growth of the auto industry.

“In the 70s, “no one was buying used vehicles.  If the government is willing to make things happen, they must ban importation of used vehicles. As I am speaking here, we have for long assembled 500 cars that cannot be sold.”

He challenged the Federal Government to make up its mind as to what it wants to do and achieve.

He added: “And as I have said at several occasions, no woman will deliver a child without going through pain and without losing blood, even if delivered by caesarean. If you ban the used vehicles now, the auto assemblers will be able to sell more and increase volumes.”

“Initially, it will be painful, but at the long run, prices of vehicles will come down, and today’s new vehicles will become tomorrow’s used vehicles. In other words, those interested in buying used vehicles will have them available in a matter of three, four years.”

For Mr. Boyi, Managing Director, PAN Nigeria and Deputy Chairman, Nigeria Automotive Manufacturers Association, NAMA: “All government need do is increase tariff on used vehicles, assist Nigerian vehicle buyers by supporting  vehicle finance scheme as spelt out in the policy, and as it was in the 1970s and 80s’.

“Let us look at what made the first auto policy work in the 70s and 80s. Had the government remained steadfast, there would have been no need for another auto policy.”

“And I will like to add that you do not just make imported used vehicles more expensive, also ensure that vehicle importation record is linked with vehicle registration. In other words, create a central record that will contain data of vehicles imported, for which the appropriate duties are paid. That will shut the door against vehicle smuggling.”

Mr. Thomas Pelletier, Managing director, CFAO Automotive Equipment and Services Ltd,  supported imposing higher tariff on imported used vehicles and asked the government to discourage automobiles from coming through the land borders.

“It is not right for duties on imported used vehicles to be lower than that of brand new vehicles,” he argued. “Rather, custom duties on used and new vehicles should be at par.

“Beyond that, there is a need to ban importation of used vehicles through land borders. And the Federal Government should create an enabling environment for auto finance.”

Mr. Tokunbo Aromolaran, Managing Director, VON Automobile and Chairman NAMA, suggested progressive ban on used vehicles as the way forward.

He said: “The fact is that it is abnormal to have a very small market such as we have at the moment. It is so because used vehicles are holding the chunk of the market. For the auto policy to succeed, used vehicles should not be competing with locally assembled vehicles. The least the government can do is impose a levy as envisaged in the auto policy.

“Also, assemblers should come up with affordable cars, which can be churned out in numbers. At the same time, the government should ban used cars gradually, not at once.”

He suggested a policy that would restrict importation of vehicles via the nation’s sea ports only.

“Smuggling cannot be controlled if we continue to allow vehicles from Cotonou,” Aromolaran added.