Nigeria Autos Report Q2 2010 – New Market Report Published
We believe this shift is apt, given the state of its domestic industry and since we believe it will be difficult for the country to attract much-needed foreign investment in the current economic environment. In a February interview with The Daily Trust, Peugeot Automobile Nigeria’s (PAN) deputy managing director, Malam Shebu Dauda, said the automaker’s […]
We believe this shift is apt, given the state of its domestic industry and since we believe it will be difficult for the country to attract much-needed foreign investment in the current economic environment. In a February interview with The Daily Trust, Peugeot Automobile Nigeria’s (PAN) deputy managing director, Malam Shebu Dauda, said the automaker’s performance in 2009 ‘wasn’t good’, although he declined to give specific sales figures. Dauda said problems faced by the sector could be improved through changes in government policy and incentive schemes like those implemented in other countries. PAN, the country’s sole manufacturer, insists it does not need a government bailout in the same vein as General Motors Company (GM) and Chrysler in the US, but rather better industry policies and patronage for its cars.
Still, there is little to suggest that Nigeria is on its way to becoming a burgeoning auto manufacturing hub. Several initiatives have been launched to save the Nigerian automotive industry, including privatisation, state-backed car loans and capital injections, but none have succeeded. All of these factors lead us to believe that while auto output will grow over the forecast period, production numbers will be so low that Nigeria will remain a marginal player. We see total vehicle production rising about 5% year-on-year (y-oy) in 2010 to 1,403 units. By 2014, we believe this figure will increase slightly to just 1,686 units. However, we believe more Nigerians will buy cars over the long term as a consumer class establishes itself. Vehicle ownership rates are low, at less than 3% of the population. This is well below rates in other developing economies. We expect vehicle sales to start rebounding this year, posting 30% y-o-y growth to 20,968 units. We anticipate vehicles sales will keep rising steadily over the forecast period, and for total sales to reach 42,847 units by the end of 2014.
New vehicle imports have suffered amid the credit crisis. New auto imports sank more than 70% y-o-y in January as a lack of credit led to a fall in consumer demand, Reuters reported. Figures show that imports for the month came in at 2,500 units, versus 9,200 in the year-ago period, the report said. Financial institutions ‘are not lending at all’, the head of marketing at Dana Motors, which imports Kia Motors vehicles, told the wire agency. However, the report said that importers expect demand for imports to rebound as financing becomes more widely available, with some even predicting double-digit growth in 2010.
We also believe imports will begin to rebound in 2010, as lending returns to more normal levels and local production only marginally increases. We foresee imports rising about 5% y-o-y in 2010 to 17,703 units. However, this pace of growth should accelerate over the forecast period. By the end of 2014, we estimate that auto imports will surge 18% y-o-y to 39,015 units.