To “do nothing” in response to the rise of the Nigerian automotive industry would be “hugely problematic”, says B&M Analysts MD Douglas Comrie. Population
He says a rival assembly industry in the West African giant, now the country’s second-largest economy, may dwarf South Africa into “an island”, selling vehicles into its 50-million-plus population only, instead of exporting vehicles into the rest of Africa.
The immediate effect of Nigeria’s recent push to develop its own automotive assembly industry by, for example, sharply increasing duties on imported vehicles, has been that South Africa’s automotive industry lost some vehicle exports to the West African country, says Comrie.
However, this impact may expand over time.
“Not enough progress has been made on regional trade agreements,” he adds.
Comrie also notes, however, that Thailand is facing a similar situation to South Africa’s, with nearby Vietnam rising as a vehicle assembler.
While Thailand is supplying parts to Vietnam, it is also focussing strongly on increasing its competitiveness in the “20, 30 years” it will take to build a Vietnamese industry.
Developing a Nigerian automotive industry will be a similar “long journey”, says Comrie, and South Africa can, in the meantime, benefit from sending completely knockdown (CKD) kits to Nigeria for vehicle assembly.
CKD kits contain most of the parts necessary to assemble a complete vehicle.
Metair Investments South African operations COO Ken Lello notes that “many people saw the development of the Nigerian industry as an opportunity, through the export of CKD kits, but I don’t see it that way”.
Benefits“Nigeria can land components cheaper from Thailand than South Africa.”
Lello says it is important to establish a free-trade zone in Africa, as it will provide a number of benefits to the South African automotive industry.
“We have not gone far enough in developing such a zone.”
•Comrie and Lello spoke at an APDP workshop held at Automechanika 2015