Kunle Ade-Ojo MD Toyota Nigeria Limited and the President Coscharis Group, Dr. Cosmas Maduka
As recession bites harder, auto dealers and auto companies in the country struggle to remain in business amidst spiralling foreign exchange and skyrocketing prices.
To say that recession has crippled auto industry in Nigeria would be an understatement. In fact many auto companies, including franchise owners are fighting hard to survive and remain in business.
Nothing confirms this trend more than the statement credited to the Managing Director of Toyota Nigeria Limited, Mr. Kunle Ade-Ojo who described 2016 as “a very, very tough year and at the same time we are very grateful to God. Toyota Nigeria has a very strong footing, strong foundation which we keep on strengthening for us to try and weather the storm that is hitting most companies and industries this year.”
The harbinger of the current challenging environment for auto industries has been the foreign exchange fluctuation. Many auto experts express worry over the instability in the foreign exchange market which has a negative effect on the business. While they would have ordered for vehicles at a particular rate, before such vehicles are shipped to Nigeria, the rate would have gone up, thereby creating panic within the distribution channel.
What option for the auto companies? This is a question which many stakeholders found difficult to answer. But analysts say the situation requires taking a tough course to remain in business as sale of new cars did not only drop but the prices quadrupled.
Giving an account of 2016 performance, the Toyota MD said, “In 2015, the whole market brought in about 15,000 but last year (2016), the market struggled to bring 6,000. This is a major decline as far as importation is concerned. When you look at forecast for the year as far as retail sale is concerned, the market is also going to drop about 50 per cent.”
Nissan Stallion which imported 45,000 units of vehicles in 2015 only managed to bring in about 10, 000 vehicles last year. In fact it was learnt that no order has been placed for new vehicles for the first quarter of this year.
With the trend projected to continue this year as forex keeps spiraling, many auto dealerships are left with no other option than to devise other means of survival to remain afloat.
Used car trading as reaction to recession
A foray into the trading of used cars, popularly known as tokunbo is described as the perfect reaction to recession since brand new cars are no longer within the reach of average Nigerians.
Before now the used car business appeared to be the exclusive business of little known auto dealers but when the ‘big brothers’ in the auto industry decided to embrace the tokunbo market, it was clear how the recession has hit them really hard, necessitating the diversification into the tokunbo trade to “keep body and soul together” as one expert put it.
It was gathered that Cosharis Motors, Elizade Nigeria Limited, Kia Nigeria Limited, Mandila, among others have entered the used car market. Elizade set up the Used Toyota Vehicle Division which, according to the company, was “to meet quite a reasonable number of customers’ expectation with regard to a wide variety of American used Toyota cars with the intention to assist and satisfy the Nigerian market”.
Kia Nigeria Limited also recently launched the “best ever certified used car programme” which it said was a “platform to get the best valuation for their cars in real time at our used car showroom in Lagos.”
Dana Motors, which is the representative of Kia Motors in Nigeria, also stated that the used car programme would provide the opportunity for people to sell their old Kia cars or swap them for new models.
It said, “The programme enables you to sell your car or swap it for a new model either by outright purchase or finance scheme. We are partnering one of the leading banks to provide a highly competitive EMI and repayment tenure to best fit your budget.”
Stakeholders in the auto industry have also encouraged dealers to venture into the used car business given the declining purchasing power of Nigerians to buy brand new cars.
Director-General, National Automotive Design and Development Council, Aminu Jalal had disclosed that while dealers of new vehicles are struggling to sell about 20,000 units in a year, the tokunbo market controls over 200,000 units annually.
He said, “The current economic situation is affecting the market share of vehicles. For every per cent growth in the GDP, the demand for vehicles grows by two per cent. But when there is recession, people stop buying vehicles and the demand goes down.”
Despite the fact that prices of even tokunbo vehicles have gone up, though not as bad as it is with the new vehicles, this sharp rise was expectedly blamed on the forex.
A check on prices of these tokunbo cars by our correspondent indicated that some of them have gone up by between 70 to 120 per cent. For instance, a Highland 2005 LTD which used to be N2.5m is now N3.5m; Toyota Corolla 2005 (formerly 1.6M, now N2.3m); 2001 model which used to be N800,000 is now N1.2m; Venza 2009 model is now N6.5m from N4.5m, among others.
However for the brand new cars, it is a new ball game entirely. According to a principal consultant for Nissan Stallion, Mr. Manny Phillipson, prices of new cars have quadrupled, gone up sporadically. He said, “It is a terrible business for automobile sector”.
After sale as another lifeline
Though after sale service is a vital component of automobile business and any serious auto company would strive to provide after sale services to its clients as much as possible, the present recession has made it much more imperative. It was gathered that with the recession biting hard and the inability of most Nigerians to buy brand new cars, provision of after sale services has been made very paramount.
Toyota MD confirmed that its focus this year would be on after sale services, especially as there are indications that many companies might not order for new cars any time soon.
Many dealerships in Nigeria now see another prospect in after sale services especially as many clients would prefer to maintain their vehicles in accredited workshops of the franchise owners. In addition, sale of vehicle parts also keeps the dealerships going in this time of recession.