Saturday, March 29, 2008

Building a car industry in nigeria

After reading an article on Lanre's blog on building a Nigerian car, it got me thinking. A snippet from his post

Taking these dynamics into account, it would be a colossal waste of money to try to buy a Nigerian car for the following reasons:

1. The demand for cars is insufficient
2. The support industries are absent
3. It is not the place of government to pursue such an undertaking.
4. The car and the industry cannot be globally competitive.

Even with the coming of consumer finance, I doubt we in Nigeria buy 100000 new cars a year. This is clearly not the kind of numbers that can sustain and industry. With global production of about 25 million cars per annum, the Nigerian market may not figure significantly with amy major manufacturer.

I agree with his observation and after a quick research on the annual car sales in Nigeria, the figure came in at 84,398 for 2007. A relatively low figure compared to other upcoming car manufacturing nations like south Africa with 612,707 and India with 1.99million for 2007. The problem is that those numbers are just for new car sales. Nigeria does have the market for cars, but used cars dominate the market and finding solid figures is a problem. This disparity between the used car and new car market shows that there is an opportunity. it could also point to the low availability of financing to drive new car sales.

The relatively low new car sales combined with the inadequate infrastructure also illustrates why Peugeot Association of Nigeria is having a hard time competing with imports and have themselves started importing fully built vehicles as it is cheaper to import a car than it is to build one in the current Nigerian situation.
At the end of the article he suggested;

we should look to leveraging our low cost base and any other economies of scale we enjoy and look to the production and export of car components along the lines of how South Africa has created a niche for its self in the export catalytic converters. This can happen with the support of government through the Nigerian Automotive Council.

This is definitely doable, finding something that we are good at or can take the most advantage of and using it as a basis for our automotive infrastructure would go a long way in making Nigeria ready for the industry. there are already makers of car components in Nigeria especially in the east, the products just have to be raised to world standards and then pricing advantage would help the products make inroads into the international market.

Hope is not lost on building a Nigerian car though we don't have to make cars in the millions. If the numbers of used cars are taken into consideration, one can deduce the true market for a Nigerian car. The car should be cheap enough that it would steal sales from the used car market and make a good export to neighboring countries. Just as the innovative Tata nano is going to steal sales from scooter and motorcycle sales thereby expanding the car market. Thats why I say there is a market for a Nigerian car. If it is made right it would be affordable for most of the population creating a market on its own.

If henry ford looked at the market numbers when he decided to make the model T, there would not have been such a car as the market did not exist at the time. But the market sprouted once the right product was there fulfilling a need.

Thursday, March 13, 2008

Tata Nano: A 21st century Peoples Car

The recent introduction of the Indian Tata Nano has created a sensation in the international media for cheap cars for developing countries, some good, some not so good. Regardless it does go a long way to illustrate the possibilities when one focuses on designing cars specifically for that kind of market.

At $2500 (approximately ₦300,000), the Nano is by far the most affordable brand new car in the world. That in itself is an achievement, something many of the contemporary automakers ridiculed at first. But the real success of Nano is the numerous patents filed for the car. The car is not just cheap it is packed with innovation. A true modern day Citro├źn 2CV. Tata in the process of designing the car has created new techniques for manufacturing that can be put into their conventional line-up.
Cost saving measures like making use of a single wiper, using similar mecahnisms for the doors and dorr handles, making a self made 2 cylinder engine, strategic location of manufacturing facilities and suppliers shows how little improvements add up. for comparison the second cheapest car in the world is almost twice as expensive. this shows the power innovation. It is so revolutionary that it is receiving respect from western carmakers.
Tata has managed to create a vehicle that follows the principles of the historic people's cars from ford model T to the VW beetle. and answered the question revelant to the 21st century. Nigeria can follow the same route. It does not have to be a cut and paste pattern. The lessons learned from Tata just have to be implemented with respect to the market and culture of Nigeria.