‘Car prices won’t go up’

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In Nigeria
Jul 4th, 2014
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Car prices will not go up because of the new auto policy, manufacturers said yesterday.

As from January, duty on vehicles will go up to 35 per cent —to encourage local manufacturers. This, it is thought, will push up prices. But such fears are unfounded, according to the National  Association  of Automobile Manufacturers (NAMA).

In fact, said NAMA in a statement, going by the policy, cars assembled overseas and brought into Nigeria will cost more, not those assembled locally.

NAMA’s logic, according to Executive Director Arthur Madueke, is that locally produced vehicles’ prices will  gradually fall, because prices crashed in aviation and telecommunications following a similar policy.

Madueke said: “We pledge our support to the Nigerian people that there would be no increase in the prices of vehicles as being heralded by harbingers of doom, who wish themselves well at the detriment of the growth of Nigeria for the benefit of all.”

NAMA accused opponents of the automotive policy of using scare tactics against a progressive policy designed to make cars cheaper in Nigeria, domesticate their production, create jobs and bring about transfer of technology. “It was clear that the country needed to gravitate in a new direction, away from the import mindset, if it was going to embark on sustainable industrial development. Only a select group of traders benefited from a high end auto market with massive resource drainage in form of foreign exchange outflow and littering of the landscape with a scrap heap in the name of fairly used cars,” Madueke said.

NAMA said it is against this background that the Federal Government launched a reformatory and revolutionary programme to reposition the economy on an industrial platform.” This necessitated a structural change, one that entailed a re-shuffling of resource allocation away from finished goods importation and distribution. It was clear non-value adding businesses in the auto sector had to give way to more productive linkages.

“To achieve this policy shift, it became necessary to ensure the buy-in of all stakeholders. The Federal government embarked on a massive consultation to explain the industrial development vision, sensitise affected groups and educate them on changes required to re-integrate into the new paradigm.

“People naturally resist change. Rather than study the new value chain arising from local vehicle assembly operations, and determine where to position given the new platform, most in spite of acknowledging the immense benefits of the new policy set out to undermine it to preserve the status quo.”

The association accused car importers of embarking on false propaganda that the new policy will lead to price escalation. “Such critics did not consider the fact that tariff has only been used as a tool to redirect incentives to the value-adding segment the government has decided was germane to the success of its industrial revolution agenda,”NAMA said.

“People have also cited lack of infrastructure as reason why a market of this magnitude, the largest in Africa, should not venture to local production. No nation has had to wait till all its infrastructure is in place to venture into production. It suffices to know that resources are being channelled to areas where the country has comparative advantage, which when diligently developed would make it competitive,” the association remarked.

NAMA praised government for defending the policy and warned the public against being “swayed or fooled by laggards” who failed to move in response to the very strong stimulus provided by government.

“The government took adequate notice of the likely fallout of this policy initiative and put measures in place to cushion whatever effect an adjustment in tariff of imported and locally produced vehicles would have on vehicles prices. It effectively managed the supply side of the equation to ensure that, there is no justification to raise prices.

“In the first instance the implementation of the policy was delayed almost six months, allowing importers to adjust their plans and inflow serious inventory before tariff adjustments took effect. The Federal Government, furthermore, had the implementation of the tariff on used vehicles extended to December 2014. The result is that the market is awash with inventory, a situation that should drive down prices.

“In response to the announcement and as a result of the time allowed before the policy took effect, import figures available to us show that about 37,500 new vehicles were imported into the country by May 2014. This represents 72% of annual imports in only five months of the year. Withsuch high inventory levels, price increases at this time are unjustifiable and unsustainable and the public can look forward to a reversal in due course.”

In addition, the statement said, the local assembly plants have swung into action and cited examples, such as Stallion Nissan Motors Nigeria Limited which announced the commencement of production of the popular B segment compact Sedan “The Almera” in May 2014 which, they explained, is being “introduced into the market at a very competitive price, arising from the pass-on of auto policy incentives to the masses”.

It also cited Peugeot Automobile, which is launching its “Made in Nigeria” Peugeot 301 this week, and has two other models lined up for launch in quick succession.

Hyundai Motors Nigeria has begun the production of four models of its compact segment and small SUVs in the i10, Xcent, Elantra and iX35.

Innoson Vehicle Manufacturing has expanded local production significantly since the announcement of the policy. New investments have been made to enhance its local content programme and increase local value-added. “Its SUVs are already in the market and proudly plying our roads,” NAMA said.

The association urged Nigerians to bear with the government, listing some countries that have gained from such policy. They include South Africa, Brazil, India, Egypt, and Thailand. All have thriving auto industries today, NAMA said.

NAMA spoke of the gains of the policy, saying: “Since its announcement, no less than five major Original Equipment Manufacturers, OEMs, have signified their intention to invest in Nigeria and produce vehicles, using Nigerian labor and resources. Investments running into tens of billions of Naira have been recorded and continue to flow in.”

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