…Why ‘tokunbo’ vehicles may continue to thrive in Nigeria

In the face of current economic challenges and recent government policies in Nigeria, experts have projected that auto buyers could shift attention to vehicles from China, particularly in the commercial segment against premium brands imported from Korea and other parts of the world.

Indeed, despite government’s effort to reduce import of used vehicles into the country through its auto policy, new vehicles still suffer patronage compared to ‘tokunbo’ vehicles.

According to stakeholders, there was upturn in the prices of brand new vehicles even with the facilitation of production of components and vehicles of international standard at competitive prices.

In the last quarter of 2015, Stallion Group, a major auto dealer unveiled a subsidiary that would assembly about four brands of Chinese vehicles in the country.
With plants in Ikotun, Lagos, the organisation plans to assemble Foton, Changan and BAIC models, as well as the indigenous Stallion Force to give customers less expensive vehicles.

Toyota Nigeria’s Elizade Motors Limited also plans to begin assemblage of a Chinese brand, JAC, at its Ikotun plant in Lagos by second quarter of 2016.
Franchise owner of GAC Motors in Nigeria, CIG Motors is currently working on a plan to begin assemblage of the Chinese brand in Nigeria before the end of second quarter in 2016.

It is also expected that Kewalram Chanrai Group, distributor of Mitsubishi and Isuzu Motors may begin assemblage of the brands along with other Chinese brands.

Group Deputy Managing Director, Kewalram Chanrai Group, authorise dealers of Mitsubishi, Isuzu and some Chinese Motors in Nigeria, Victor Eburajolo believes that it could take some time for premium brands to gain the market if the market eventually becomes dominated by vehicle brands from China.

Investments in value addition services to drive competition
Experts explained that the sector would be under pressure to offer creative and value addition services, particularly in vehicle maintenance and spare parts since customers would be demanding more for less.
Chief Executive Officer of Admiralty Motors, Maryann Chukwueke said: “The good thing is that we are going to adapt and readjust to become more creative. We are matching into 2016 with courage and stakeholders have to go back to the nitty-gritty and do the needful so that we can increase our business activities.”

Projecting a downward review of services, she said “everybody has to do more for less so that we can indirectly create more value for the country; more things have to be value driven today than yesterday because the situation is forcing us to do that and we must do that to survive”, she added.

Auto financing scheme to salvage the sector
If the planned auto purchase scheme currently awaiting the approval of the Central Bank of Nigeria (CBN) becomes a reality, ownership of brand new vehicles may become cheaper and easier.
The National Automotive Design and Development Council (NADDC) and West Bank, the technical partner on the project, are said to be working hard to make the project a reality.

Indeed, experts maintained that the introduction of federal government’s forex rule and the nation’s struggling economy could continue to pave way for dealers of used vehicle in 2016.
A report by PricewaterhouseCoopers last year projected that tokunbo vehicles may continue to thrive and be around for the next 19 years but would be phased out by 2034 if the Federal Government carefully implements the auto policy.
The group put the number of used cars imported in 2015 at 335,000, which is 268.78 per cent higher than new vehicles imported into the country.

The price of brand new vehicles has exponentially risen. Many people cannot afford new cars right now. Most of the cars that were between two to three million naira are now about five to seven million naira. The small and sedium scale sector have also been squeezed with poor economy so the people still have to go to tokunbo vehicles because they are less expensive

Some players believe that the development suggests that the National Automotive Industry Development Plan (NAIDP) is beginning to have impact on the Nigeria’s automobile industry, but there was a general lamentation that the forex rule and downturn of economy could continue to take new vehicles from the reach of ordinary Nigerians.

Seen as danger to the realization of affordable new vehicles as promised by NAIDP, the reality that Centre Bank of Nigeria would no longer sell forex directly to Bureau De Change operators is projected to further worsen the situation.
The naira, which was about N210 to one dollar in first quarter last year, went up to about N280 in the first week of December and according to experts may increase further to about N400 to a dollar.

Currently, local vehicle assemblers are granted zero per cent tariff on Completely Knocked Down (CKD) vehicle parts and allowed to import twice the number of vehicles locally produced at 35 per cent or 20 per cent as a way of bringing down prices of vehicle, while import tariff on used vehicle stands at 35 per cent.

Operators of Roll-On Roll-Off (RoRo) terminal had lamented lack of patronage stating that most of the vehicles meant for Nigeria; particularly used vehicles were now diverted to Cotonou Port and brought into the country through porous borders.
Eburajolo said business environment in the previous favoured dealers of Tokunbo vehicles.
Eburajolo said: “Because of the value of the value of the naira, not too many people are able to buy new vehicles so the tokunbo vehicle was booming. But that is not where the problem is; with the devaluation of the Naira what we are looking at now is the replacement cost of the vehicles”.

He said the first and second quarters of 2015 may remain challenging for the sector, stating that commercial vehicles could thrive gradually.
Chukwueke said there was continuous drop in sales of vehicles in the country owning to the nation’s economic situation and government policies.
“The price of brand new vehicles has exponentially risen. Many people cannot afford new cars right now. Most of the cars that were between two to three million naira are now about five to seven million naira. The Small and Medium scale sector have also been squeezed with poor economy so the people still have to go to the Tokunbo vehicles because they are less expensive.”
“The down impacts of government policies have been massive since we manufacture no vehicle. With the development 2016 may still be very difficult because one can’t import anything with the exchange rate,” she stated.
According to her the drop in the number of vehicles imported into the country is of benefit to the country in terms of regulation but its other implications may mean a reduction in economic activities and reality of the effect of government policies.