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A Case for the Nigerian Auto Policy

Implementing the Auto Policy in Nigeria can’t be more necessary than now, going by the depressing situation in the auto and allied industries at the moment, coupled with the urgent need to create urgent alternative for the troubled oil industry and considering that even with Agriculture, the automotive industry is about the steering wheel of any economy, EFULA ABBAH writes…

[dropcap]A[/dropcap] critical survey into the global automotive industry shows an increasingly universal relocation of source of wealth and development to vehicle manufacturing, despite great natural endowment in countries, with every one putting man and machinery into full use, in order to come up with different new designs and functions for their vehicles. Every one is trying hard to either out-class others or boost international patronage for their products.

QUOTEThe competition is getting much keener and one wonders what other type of innovation the initiative automotive manufacturers in Nigeria would have to put in, to either compete favorably with global auto producers or stand out, considering the limitations inflicted by underdevelopment in evolving electronics and robotic devices which is the vogue in all auto manufacturing industries world over.

Suffice it to say, early to bed, early to rise; there is quick need to get the ball rolling so that our emerging auto manufacturers can key into the trend of the current evolving culture in world auto industry or else, we just might have to play last fiddle for ever, despite not relegating the Nigerian factor which is a driving force to do well in whatever we set our good minds to do; but that might be pushing our luck too far, in this case.

boi_auto1Considering the advancement of the auto industries in America and Europe, even the keen rivalry coming from China and Japan, not side tracking India, the Nigerian Auto Manufacturer has an uphill task ahead which can only be assisted by an enabling environment to start exploring earlier into their conviction to challenge the too much capacity, too many competitors and too much redundancy and overlap which the global industries of auto manufacturing is experiencing today.

However, with such a very delicate task in an industry which is practically concerned with consumer demands for the safety of human lives, styling and comfort also play significantly, the more reason to operate in a comfortable environment so as to harness efficiency.

Thai-automotive-industry-structureExamining the growth patterns and changes in ownership structures, trade patterns and role of governments of selected countries, especially in Asia viz-a-viz China, India, Indonesia and Thailand as well as Japan, the automobile sector of their individual economies is fetching more exportation than any other sector.

Thailand, for example is mainly driven by Japanese FDI, their economy is mentally focused to exportation despite little consideration to local inputs. Thailand is currently said to be making above average income from their auto industry. The Chinese automobile sector is growing very fast and is already making its dent in the international trade arena, with a particularly strong position in the component sector. India, on the other hand, is consolidating its position with strong domestic and external demands. The Indonesian automotive industry is essentially an assembly industry dominated by the major Japanese car manufacturers as in Thailand, but also increasing its exports in imaginably high capacity.

Chinese Landrover look-alike, Land Wind
Chinese Landrover look-alike, Land Wind

The galvanizing factor that encouraged these foremost Asians is their government policies towards investment liberalization and the benefits it brought to private players encouraged more participation because most of them stepped in with modern technology and FDI started pouring in mainly through the hands of Japanese automobile majors.

Different countries adopted different policies that gave somewhat operating environment which enabled them to grow.

Chinese government promoted consolidation strategy of the industry through mergers and acquisition; while Indians sought overseas market.

And in both of these countries, government policies have been towards development of the indigenous automobile sector through strengthening the national players.

Economic-outlook-Q3-2015-China-US-and-EU-auto-salesWhile Thailand focused entirely on the export market through Japanese companies, domestic players in Indonesia remained as partners to MNCs in assembling activities. Protection in automobile sector earlier was mainly through high tariffs, import bans on Completely Build Units (CBU), local content use condition, and restriction on private investment and other regulatory restrictions.

Protection in component sector did not work well in general as it helped only the basic components sector to grow domestically in these countries, with most of the critical components still being imported. Thailand has aimed to close the gaps in the component sector through a focused investment promotion scheme. India is also making an effort to develop indigenous component

sector through giving focus in R&D and tightening the IPR system and thereby inviting big players to step in the critical component sector leaving the basic components in the hands of SMEs.

thailand-automotive-super-hub-2015-10-638China, on the contrary, is increasing its comparative advantage in the basic component sector through further reduction in cost. For vehicles, it is still focusing on the consolidation of the domestic sectors and improving the technological as well as managerial capabilities of the sector in general.

Specialization in automobile sector is increasingly becoming segment specific as each of these countries is finding its niche. China is specializing in components, India in two-wheeler and small vehicles, Thailand in pick-up trucks and passenger cars and Indonesia in utility vehicles.

While Thailand is exporting to developed countries and strengthening its position in the sub-regional association, ASEAN. Indonesia is also increasing its trade relation with the association. India is concentrating on Middle East and south Asia, beside their traditional developed country destinations.

With the gradual opening up of the component sector, individual governments are strongly supporting the development of critical domestic component and sub-system suppliers through, improvement in the investment environment, stronger patent regimes and incentives for R&D.

In Nigeria, however, instead of government’s unsettling mentality to take the bull by the horn, it should at least make stronger statement about some of the major ingredients in the auto policy, so that those auto manufacturers who are somewhat prepared to get their acts going can get adequate motivation to do so.

Support can come from stabilizing electricity or completely subsidizing diesel and PMS in the auto manufacturing industry as well as it is also necessary in other producing sectors. Electricity or its variable alternative is very significant in auto manufacturing, or else the use of important devices like robotics may be useless.

Going by what the likes of KIA and Innoson, among others are able to exhibit for now, shows that even with the least of fundamental aid, Nigeria auto manufacturers can dare the skies in very few years to come.

However, with the apex body of the auto manufacturers in the African continent, Association of Africa Automobile Manufacturers, AAAM visiting Nigeria, it is believed that it will serve as a wake up call for both government and players in the Industry to see the significance of leading the revolution for a 21st century Industrialization in Africa, through the Auto industry in Nigeria.

It is also believed that the AAAM will find it thoughtful to ginger the initiatives craving the World Auto Industry in other parts of the continent, especially by advising on specialization in Auto Parts manufacturing instead of everybody going for the same kill and creating unhealthy rivalry among countries.

With South Africa, already the global auto industry hub in Africa, Nigeria by all ramification is ready to take the world by storm, hence, AAAM should see this visit as avenue to propel members of the National assembly in Nigeria to hasten the passage of the Auto policy into law, so that Auto Manufacturers in Nigeria will take advantage of operating under lawful environment to expand their and not in the type of uncertainty that is presently beclouding the industry capable of  discouraging their individual initiative, since the Policy is yet to gain full implementation status and legality.

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