Import duties denting vehicle exports

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BR Nissan _7204a Independent Newspapers Nigeria has increased its vehicle import duties as it seeks to build a domestic automotive industry to assemble vehicles like these in Nissan's Lagos plant. Photo: Supplied

Johannesburg - South African vehicle manufacturers have to rethink their strategy to penetrate the African market after several countries introduced trade barriers, such as duties and levies, on imports of new cars.

Ian Nicholls, the vice president of operations at General Motors South Africa (GMSA), confirmed this week that new regulations and much higher vehicle import duties in Nigeria meant automotive companies would need to do some level of assembly in that country to compete effectively.

“GM will have to rethink its plans in Nigeria. We have to look, along with our distributors there, what the opportunities are to do something locally. But we haven’t made a decision to do something in Nigeria,” he said.

It is believed another vehicle manufacturer with production facilities in South Africa is considering establishing an assembly plant in Nigeria.

Alec Erwin, the former South African minister of trade and industry and of public enterprises, was a technical adviser to the Nigeria Automotive Council and contributed to the creation of the strategic framework for the development of the Nigeria Automotive Industry Development Plan (NAIDP).

Nicholls said Nigeria’s automotive plan defined what semi-knocked-down (SKD) assembly must comprise, which meant it was not a case of merely taking the “wheels off and that’s it”.

BR Alec Orwen 983[1] Alec Erwin helped Nigeria set up the NAIDP. Photo: Oupa Mokoena Independent Newspapers

But he said the biggest challenge in Nigeria was that the country did not have any existing automotive component supplier base.

“The challenge is going to be how you set up a SKD assembly facility that makes financial sense without any local value add except labour. By its very nature, SKD just adds on to the cost of a vehicle,” he said.

Nicholls stressed that Nigeria had a population of 160 million people and a new car market of about 50 000 units a year but the market for used cars and grey vehicle imports was about 450 000 units a year.

“If you control the used car and grey import market, you could have a significant industry in Nigeria so it is something you just can’t ignore,” he said.

Nico Vermeulen, the National Association of Automobile Manufacturers of SA’s director, confirmed yesterday that vehicle exports by some South African-based manufacturers to Nigeria were affected by the introduction of duties on new car imports, but it was difficult to quantify the impact.

Zimbabwe also has plans to drive a policy promoting vehicle assembly through the importation of knocked-down kits and the imposition of higher tariffs on imported vehicles.

BR Ian Nichols [1] Ian Nicholls, GMSA operations vice president. Photo: Quickpic Independent Newspapers

Vermeulen said Zimbabwe’s plans to introduce duties on new vehicle imports was contrary to the Southern African Development Community free trade deal and would have to be addressed by the Trade and Industry Department.

Attempts to obtain comment from the department were unsuccessful.

Vermeulen said South Africa’s new vehicle manufacturing industry did not regard Erwin as disloyal for being involved in the development of the automotive industry development plan in Nigeria because the logic behind the plan was that parts for its automotive industry were likely to be supplied from South Africa.

Nigeria emerged last year as a potential competitor to South Africa for foreign direct investment by global multinational vehicle manufacturers when the Renault-Nissan alliance and west African conglomerate Stallion Group announced their intention to jointly launch vehicle assembly in Nigeria and indicated there was potential to develop the plant into a major manufacturing hub for Nissan in Africa.

However, Nissan South Africa managing director Mike Whitfield, who is responsible for the sub-Saharan Africa region, including South Africa and Nigeria, stressed last year that it did not pose any threat to the domestic motor industry and was an opportunity for co-operation and complementation.



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