The Nigerian Automobile Landscape: A Shift Towards Chinese Brands and the Need for Robust Auto Policies
The Nigerian automobile market, particularly the truck segment, has witnessed a significant shift from Western brands to Chinese alternatives. This transition is primarily driven by the value proposition offered by Chinese manufacturers, who provide vehicles at significantly lower prices compared to their Western counterparts. Mr. Taiwo Shittu, Managing Director of Lanre Shittu Motors (LSM), a prominent player in the Nigerian auto industry, highlights this shift, emphasizing the superior return on investment offered by Chinese trucks. While initially perceived as inferior due to their lower price point, Chinese brands have strategically penetrated the global market, including the United States, demonstrating their quality and performance. Mr. Shittu attributes the success of Chinese brands to their vision and ability to anticipate market trends, particularly the impact of inflation and currency devaluation on consumer preferences.
The success of LSM, as evidenced by recent awards and recognition, is attributed to the visionary leadership of the late Chairman, Alhaji Razaq Olanrewaju Shittu, who laid a solid foundation for the company’s growth. Mr. Shittu emphasizes the importance of the company’s commitment to providing not only quality vehicles but also robust after-sales support, a key differentiator in a market where briefcase dealers often lack the infrastructure for sustained customer service. He believes that the government’s role in promoting the auto industry is crucial and advocates for a return to and strengthening of the national auto policy. This policy should include incentives for local assembly plants and measures to ensure a level playing field for genuine investors who have made significant investments in the sector.
A key challenge facing the Nigerian auto industry is the high cost of new vehicles. Mr. Shittu proposes extending the special waivers currently enjoyed by CNG and electric vehicle assemblers to all auto assembly plants. This measure, he argues, would lead to an immediate reduction in prices, revitalize dormant assembly plants, and create numerous job opportunities. He also points out the need for a stable policy environment to attract foreign investment. Major Original Equipment Manufacturers (OEMs) require assurances that their investments will be protected by robust laws and regulations, and a consistent policy framework would instill confidence and encourage long-term commitments. Nigeria, with its vast market and strategic location, has the potential to become an automotive hub for West Africa, but realizing this potential requires government support and a conducive investment climate.
The challenges faced by auto assemblers and distributors in Nigeria are multifaceted. The capital-intensive nature of the business demands substantial investment in infrastructure, including after-sales support networks. Mr. Shittu highlights the unfair competition posed by briefcase dealers who operate without the same level of investment and commitment to customer service. He advocates for government intervention to regulate the market and ensure fair competition, protecting the interests of established players who have made significant contributions to the industry. The lack of consistent government policies and incentives further hinders the growth of the sector, discouraging long-term investments and preventing the industry from reaching its full potential.
Mr. Shittu expresses optimism about the future of the Nigerian auto industry, particularly in light of President Tinubu’s agenda for industrialization. He stresses the pivotal role of the auto sector in achieving this goal and urges the government to prioritize the sector by providing special incentives and ensuring a level playing field for genuine investors. Guaranteeing the security of investments over the long term is crucial for attracting both local and foreign capital. The National Automotive Design and Development Council (NADDC) is recognized as having a crucial role in identifying and supporting genuine players in the industry, guiding policy implementation and ensuring that incentives reach those who have made substantial investments and are committed to the long-term growth of the sector.
Addressing the current tax regime, Mr. Shittu points out the burden of multiple taxes, including VAT, duty, and levies, on auto assemblers. Harmonizing and streamlining these taxes, along with extending waivers similar to those granted to CNG/electric vehicle assemblers, would significantly reduce the cost of locally assembled vehicles and make them more competitive. This, in turn, would attract major OEMs to invest in Nigeria, either directly or through partnerships with indigenous firms. The reluctance of banks to provide auto finance is another challenge. Past experiences with loan defaults have made banks cautious, but Mr. Shittu believes that with appropriate risk mitigation strategies and government support, auto finance schemes can be revived to stimulate demand and support the growth of the auto industry. LSM remains committed to the Nigerian market and is expanding its operations, including the construction of a new, larger assembly plant, demonstrating its confidence in the long-term potential of the Nigerian auto sector. The company’s focus on commercial vehicles, including CNG buses, reflects its commitment to providing sustainable transportation solutions and contributing to the country’s industrialization goals.
