NEW AUTOMOTIVE POLICY IS A TALL ORDER
NEW AUTOMOTIVE POLICY IS A TALL ORDER
Massive Public Investment in Auto Industry and Research is the Way Out
(By Chinedu Bosah)
The automotive policy announced by the federal government on October 2, 2013 is a policy that failed in the 1970s. The government has not introduced any new workable strategy and plan other than to rely on the promise of some key auto makers like Toyota, Nissan etc. Government spokesmen (Minister of Information, Labaran Maku and Minister of Industry, Trade and Investment, Mr. Olusegun Aganga) hinged the reason for initiating a “new automotive” policy on the excuse that Nigeria spends over N500 billion on importation of cars. The Director General of the National Automotive Council (NAC), Mr. Alhaji Aminu Jalal claimed that an additional N500 billion and N150 billion were spent in 2012 on importation of spare parts and tyre respectively.
Nigerian government experimented with Peugeot and Volkswagen in 1970s but failed. These two car assembly companies survived for a while because the purchasing power of Nigerians was much higher than what obtains today. Besides, the government also pursued a policy of buying virtually all official cars from the two car companies which guaranteed bulk purchase even before production. That is not the case in the last 25 years with bigger car companies emerging and displacing Peugeot and Volkswagen in Nigeria mostly with imported used cars, popularly called tokunboh.
For instance, Peugeot Assembly Nigeria Limited (PAN) used to run its assembly plants with 4000 permanent workers that produced more than 90,000 cars yearly in mid 1980s but currently hardly produces 3,000 cars annually while its staff strength is currently 250. But even then Nigeria’s auto industry was limited, based around the assembly of vehicles which were imported in the so-called CKD (Completely Knocked Down) kits.
Now Asset Management Corporation of Nigeria (AMCON), the government’s bailout agency has taken over 80% of PAN’s liability including salaries owed to staff. Volkswagen has long stopped assembling in Nigeria. Michelin and Dunlop, two big producers of tyres have shut down their factories some years back. The reasons for their closure as well as the automobile assembly companies is simply high cost of production together with deplorable state of basic infrastructure, growing mass poverty and falling purchasing power. The result was that manufacturers had increasing difficulties selling new cars in Nigeria while the appalling infrastructure meant that the country was not an attractive basis for export-orientated production.
Besides, the automotive policy of 1970s had much more prospect than this current one. In the 1970s, government advanced the policy into developing the steel industry. Steel is an important component in building an automobile, though petroleum based products like plastics and vinyls are increasingly a component of automobile. This era saw the development of Delta Steel, Ajaokuta Steel as well as the setting up of steel rolling mills in Jos, Katsina and Osogbo. Under the influence of IMF and World Bank coupled with capitalist neo-liberal policies, all these initiatives have longed been mismanaged despite investing billions of Naira. The mismanagement of the steel industry, the growing poverty and lowering purchasing power engendered by continuous implementation of capitalist neo-liberal policies of cuts in public spending and the poor state of basic infrastructures like rail etc., undermined the industry. Unfortunately, all these ingredients responsible for the failure of the 1970s automotive policy are much more pronounced today.
While government released its “new automotive policy”, it did not state how it wishes to revive the moribund steel industry likewise the resuscitation of basic infrastructure. For the big car makers, except that government is ready to subsidize the production cost and guarantee long term huge patronage similar to what is the case in Australia where the government supported the automobile makers to the tune of $10 billion in the last 7 years, they will never be interested in setting up assembly plants in Nigeria. But even bribes/subsidy to auto makers do not necessarily work, despite the help they got right now almost the entire auto industry in Australia is being closed down.
Furthermore, it is laughable when the government is projecting that this policy will drive down cost of new cars to less than N1.5million and create a minimum of 700,000 job opportunities when implemented. Currently, most new cars are sold at between N3 million and N5million while fairly used cars are sold for about N800,000. 700,000 job opportunities in Nigeria’s auto-industry will be a tall order, even UK vehicle industry employs about 700,000 workers but only 180,000 workers are employed directly while the remaining are employed in the retail and service area of the industry.
Even when the policy is yet to kick-off, the federal government came out on October 3, 2013, the day after the automotive policy was announced, with a new tariff regime for imported cars that was to begin from January 2014. The new tariff on cars has increased by 48% while merchants in the industry have projected an increase by 60% in price when other variables are considered. This they claim will jerk up price of new cars to between N4.8 million and N8 million while used cars will rise to N1.28 million. This price increase may not play out exactly as estimated by the dealers considering the fact that this new tariff regime will force more importers to boycott Nigeria’s Port to Republic of Benin, where tariff is lower on automobile which may force the government to reverse itself or reduce the tariff in the long run. This tariff regime looks more of calculated attempt to boost revenue for the state than protecting automobile makers attempting to set up plants in Nigeria. There is the potential for the policy to increase the price of used and new vehicles, an act that can make it more difficult for working class and middle class individuals to purchase cars.
With 70% Nigerians living on less than $2 a day and a minimum wage pegged at N18,000 ($113), it will not be difficult to see why Nigeria has emerged as big dumping ground for used vehicles. “The importation of tokunbo (used) vehicles,” said the Minister of Industry, Trade and Investment, “will not be a major threat to the automotive development plan”. As a matter of fact, the inability of most vehicle owners to purchase new cars makes cheaper used vehicles attractive and the only alternative. Growing number of vehicle owners settle for less costly used vehicles including Nigeria’s used cars than the much more expensive used cars from abroad, let alone brand new cars. The greatest illusion for a third world capitalist government is to pursue a policy of economic or industrial revival based on bourgeois template that guarantees profit for big business.
It is only public massive investment with workers and experts’ democratic management in the auto industry which also entails reviving the steel, petroleum, rubber industries and basic infrastructure like rail etc., that can steadily grow the automotive industry to a world standard and guarantee the development of an efficient, integrated transport policy affordable for the vast majority. Research and investment should also be geared towards electric automobile which is much more revolutionary than the traditional automotive design and construction.