The auto landscape has changed from dumping ground to manufacturing hub

This week, Honda, the world’s eighth largest automobile maker, confirmed that it has begun building cars in Nigeria.

A set of Innoson SUV's at the Nnewi factory

Before 2013, Nigeria was Africa’s biggest market for tokunbos—the local name used to describe used cars shipped from Europe and the US vehicles (mostly five to 10 years old) were brought into the country through the Lagosseaport, or smuggled through the border it shares with Benin Republic. What encouraged this massive dumping, however, was that the local auto manufacturing (or assembling) industry was virtually grounded, and investing in a new car was pretty expensive for the average Nigerian.

During the mid and late 90s, Nigeria’s roads were littered with Peugeot-branded sedans built in the Peugeot Automobile Nigeria (PAN) factory located in Kaduna, one of the busiest commercial cities in Northern Nigeria. But as the second millennium drew closer, those cars were gradually replaced by used Mercedes Benz 300's (popularly known as V-Boot), BMW’s 3,5, and 7 series, and the Madza 626’s and 323’s. This eventually led to the demise of PAN, and other car producers within the country.

In an attempt to turn this around, Nigeria launched the National Automotive Policy, an initiative to promote massive investments in affordable made-in-Nigeria cars and limit excessive importation, in October 2013. It was also aimed at reducing the growing importation bill for cars, which stood at $3.4 billion as of 2012. To discourage importation, the government doubled the then tariff regime for wholly-imported vehicles, from 35 percent to 70 percent, while it offered foreign manufacturers, willing to carry out a significant amount of their production value-chain locally, tax breaks.

Since the policy was effected in July 2014, Nigeria has been swamped with foreign manufacturers. This week, Honda, the world’s eighth largest automobile maker, confirmed that it has begun building cars in Nigeria by retooling a part of its factory that previously made motorcycles. It plans to produce 1,000 of its Accord sedans yearly at the plant, as well as make Nigeria its production base for Africa.

German automaker Volkswagen is also reported to have plans to resume production in Nigeria after a 25-year absence. Volkswagen, the second largest car maker globally, will partner with Dubai-based distribution group, Stallion, to grow its business locally. Toyota, the world’s largest car manufacturer, is also teaming up with Elizade, its lead local distributor, to develop a local assembly plant. Toyota currently sells about 18,000 to 20,000 vehicles in Nigeria annually.

Nissan, however, is already a step ahead of the bunch. As of October last year, it had unveiled the first set of SUVs assembled in its Lagos-based assembly plant, and has since added the Almera sedan and NP300 pickups to its locally produced fleet. KIA and Hyundai, amongst others, are also eager to participate in a market that is becoming more attractive by the day.

The biggest success story, however, is the rise of Innoson Vehicle Manufacturing Company Limited, a local auto manufacturer based in Eastern Nigeria. The indigenous company, founded by Nigerian industrialist, Chief Innocent Chukwuma, unveiled in December last year its new set of cars—IVM Umu and IVM Uzo—all manufactured in its Nnewi plant in Anambra State, South east Nigeria.

All of these developments have drastically changed the auto-industrial scene in Nigeria and the hope is that this rapid advancement in that sector is sustained.

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