Nigeria, now officially Africa’s largest economy, has joined the ranks of countries that manufacture vehicles locally. The Innoson Vehicle Manufacturing Company Limited (IVM) rolled out its first vehicles, a hatchback and a saloon, late last year. With tariffs on imported vehicles set to rise steeply, can this be the beginning of a new car-making era? Fredrick Mordi reports from Lagos.
The Innoson Vehicle Manufacturing Company Limited (IVM) made history late in November 2014, when it unveiled 500 made-in-Nigeria cars, built at its plant in Umudim, Nnewi, Anambra State, thus becoming the first indigenous manufacturer to achieve this milestone.
The vehicles – the IVM Fox hatchback and the IVM Umu saloon cars – are built mainly with local content and are priced lower than imported brands.
The Fox, a five-seater, is powered by a 1.5 litre engine, and comes with a four-speed automatic or five-speed manual transmission gear box, while the bigger and more executive Umu has a 2.0 litre engine.
Both cars are fully equipped with modern gadgets and navigational system. In addition, IVM also has a minibus with seven seats, called Uzo. All three vehicles are fuel efficient, according to Innocent Chukwuma, chairman and CEO of the Innoson Group.
He says: “These cars were carefully built to meet the expectations of the Nigerians. They have been prepared to offer good services to both private and corporate users.”
Already, he says, the company has sold some of the cars to those who placed orders, adding that demand is quite high. He disclosed that some states in Nigeria are already using the IVM brand of vehicles. Chukwuma, whose firm has promised to bring down the prices of cars in the country, said the Innoson Technical and Industrial Company Limited, a sister company, supplied all plastic and rubber components in the new passenger cars.
He added that IVM sourced other parts and accessories from companies such as the Ibeto Group, Omatha Holdings and Cutix Cables, operating in the Nnewi auto industrial cluster. The Nnewi cluster is one of the three industrial clusters where auto parts produced for the assembly plants, will be tested and certified in Nigeria.
The Innoson CEO, who lauded the government’s new auto policy, called on Nigerians to patronise the IVM brands of vehicles to encourage more local manufacturers to venture into the business, thereby creating more jobs and helping to grow the economy.
He adds: “Innoson is the only auto brand name that you cannot get anywhere else in the world, except in Nigeria. In America, they are proud of their Ford and Chevrolet; in India, Tata and Maruti are respected, promoted and patronised by both the government and citizens, and in Malaysia, Proton, which is also indigenous to the country, is loved as the national car brand.
“If you go to Europe, America and Asia or anywhere outside this country, you won’t see any vehicle called Innoson because the name does not exist in any other place in the world except here.”
IVM was incorporated in 2007 as a manufacturer of buses, pick-up trucks, refuse management trucks and Sports Utility Vehicles (SUVs). President Goodluck Jonathan officially commissioned the company in October, 2010. This gave IVM the needed fillip to commence full production from its plants.
Car imports drop by 20%
The Minister of Industry, Trade and Investment, Olusegun Aganga, who was the special guest of honour at the event, commended Innoson for taking the bull by the horns, by investing in Nigeria, despite the challenging operating environment, while noting that the auto policy has reduced the volume of imported cars by 20% since its introduction.
He said: “We spend about $6bn annually importing cars. However, since the introduction of this policy, we have experienced a 20% drop in imported cars and have exceeded expectations in a very short period.”
Similarly, in his remarks, Rasheed Olaoluwa, managing director, Bank of Industry (BoI), a development finance institution, whose organisation provided funding for the project, described Chukwuma as an exemplary customer. Olaoluwa said: “In Nigeria today, there are many companies that are into the car assembly. But today, for the first time, we are actually manufacturing cars. The Nigerian Industrial Revolution Plan (NIRP) is beginning to bear fruits in the key areas of competitive and comparative advantages, where we can drive growth and development in the economy.”
The president of the Nigerian Society of Engineers (NSE), Engr Ademola Olorunfemi, whose institution certified the operations of the company after an initial assessment, also commended Innoson for blazing the trail in the local auto industry, at the unveiling ceremony.
Olurunfemi said: “Within two years, Innoson has improved on all our recommendations and increased the vehicles local content up to 70%, which is not less than what is obtainable elsewhere in the world.”
The company also worked closely with the Standards Organisation of Nigeria (SON), to ensure that the products meet international quality standards.
National automotive policy
The National Automotive Policy, which came into effect in 2013, seeks to ensure the survival and growth of the local industry, using local content. Some of the key elements of the policy include: provision of affordable automobiles for Nigerians, increased employment opportunities and conservation of scarce foreign exchange.
To protect the fledgling industry against competition from imported car brands, the Federal Government had announced a tariff of 35% on imported used vehicles, effective from April this year.
Chukwuma started by assembling motorcycles. He later added buses, Sports Utility Vehicles (SUVs), pick-up vans, trucks and before he ventured into car manufacturing. Patronage has been growing as individuals, corporate bodies, institutions and governments place orders for the vehicles which seem ideal for the rough terrain. Prices begin from N1m ($5,581).
The company has also gone into tyre manufacturing and plans to build showrooms in the six geo-political zones of the country that will provide both sales and after-sales services. These will create job opportunities for Nigerians. The company plans to export the cars to some neighbouring West African countries such as the Republic of Benin and Ghana.
The government had taken steps to revamp the auto industry and protect local manufacturers such as IVM, by announcing an upward review of a phased tariff that will climb up to 70%, on brand-new and second-hand vehicles imported into the country, as from April 2015.
The implementation of the policy has induced auto dealers at the Berger Yard Auto Market in Lagos, to reportedly cut down on the number of vehicles they import by 20%. The dealers say the policy has affected patronage. Brands such as Toyota, Hyundai and Nissan have indicated their interest in starting local production of vehicles, taking advantage of the new policy.
However, some analysts believe the policy should be implemented gradually due to the current poor state of infrastructure – particularly electricity – in the country. According to the Manufacturers Association of Nigeria (MAN), about 30% of the operating cost of its members goes into alternative sources of power. Experts point out that this fact alone could make low-priced cars unrealistic for now, as manufacturers are likely to pass on the burden of high cost of production to the final consumers.
As is sometimes the case with new policies, the initiative has reportedly led to an increase in the cost of clearing second-hand vehicles at the Lagos ports by as much as 300%. This development may result in the increase of the cost of used cars. Policy analysts have therefore called on the government to address the epileptic power supply situation in the country to make the policy more effective.
But successful manufacturers in Nigeria have learnt to develop strategies to get around obstacles to doing business in the country. For the Innoson Group, which in 2012 won the African Business of the Year Award, an initiative of African Business magazine, in recognition of its success in Nigeria and Africa, these challenges may not be insurmountable, going by its track record so far. Interestingly, BoI nominated the company for the award, based on its tenacity of purpose.
Will the IVM cars become Nigeria’s equivalent of American Ford; the British Rolls Royce; or the Japanese Toyota? Only time will tell.