The Nissan plant in Nigeria
To “do nothing” in response to the rise of the Nigerian automotive industry would be “hugely problematic”, said B&M Analysts MD Douglas Comrie on Wednesday.
Speaking at an APDP workshop held at Automechanika 2015, he said a rival assembly industry might diminish South Africa to “an island”, selling vehicles to 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, was that South Africa’s automotive industry lost some vehicle exports to the West African country, said Comrie.
However, this impact might expand over time.
“Not enough progress has been made on regional trade agreements,” he added.
He also noted, however, that Thailand was facing a similar situation, with nearby Vietnam rising as a vehicle assembler.
While Thailand was supplying parts to Vietnam, it also focussed strongly on increasing its competitiveness in the “20, 30 years” it would take to build a Vietnamese industry.
Developing a Nigerian automotive industry would be a similar “long journey”, said Comrie, and South Africa could, 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 noted that “many people saw the development of the Nigerian industry as an opportunity, through the export of CKD kits, but I don’t seen it that way”.
“Nigeria can land components cheaper from Thailand than South Africa.”
Lello said it was important to establish a free-trade zone in Africa, as it would provide a number of benefits to the South African automotive industry.
“We have not gone far enough in developing such a zone.”