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.


segun said...

The reason for the low figures is simply the low standard of living. Let us imagine we came together to build a car in Nigeria, selling to neighbouring African nations with a percentage of the population able to afford these vehicles. in time, as people are empowered, made wealthy due to this and other supporting industries being created, we can engineer our own demand by first engineering a product. The idea is to start with a vehicle that is attractive to those who have some money. Allow people to earn, companies to spring forth, and you create a whole new market of people with the funds to purchase a lower end model, and then you provide the said lower model.

When Henry Ford built the Model T, as you rightly illustrated, proof that money would be made was not the motivation, because there was no such proof.

Might I also add that as a nation of untapped talent, we must not put it past our populace to come up with ideas, designs and technologies that can surpass western offerings. I think it a little defeatist to concede before we have even put an example out to be judged.

Just a thought....

Anonymous said...

A car industry is coming to Naija soon. Market or no Market we go make am.

Guy said...

we will kept talking and nations smaller than us are moving forwards, lets start making the cars first!!! You learn by doing not by talking

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EDE JAMES said...

Well 4 me its 1 tin 2 feel inferior as a result of the enviroment and its 2 tins to remain that way,4 i as an induvidual joining my idea with many other nigerians am saying that irrespective of the market standard or not NIGERIA has the most dearing potential to shock the auto world with our very own indeginous automobile design. this statment is not just an irrational statement cuz am xtremely sure of my country my ideaologic co citizen& my design ability as a concept designer on cars just let the govt give us the standard electrical supply i BELIVE NIGERIA AND IBELIVE US AS A TEAM

Anonymous said...

i really think this idea is logical sound.putting into consideration it economic benefit to Nigerians and Nigeria as a whole. it will be a welcomed development

Anonymous said...

You have been proven wrong. We are making cars, SUVs, buses and tractors now. And guess what ? Demand for it is so high the companies cannot grow fast enough.
Now they are concentrating to supply the government's transportation needs. and a neighbouring country plans to patronise buses for their public transport needs.

Innosion is the biggest I guess,

hazrah Bilal said...

Innoson is doing there best but to me it seems china manufactures d parts and nigerians put it as one peice. I also say a bus of ivm and a pickup truck of ivm, it looked exactly like toyota hiace bus and hilux 2.7vvti