Next Wave: The case for local car manufacturing in asset financing

In Nigeria, the dream of owning a car is becoming increasingly unattainable, especially for those aspiring to enter the ride-hailing business. The country's automotive industry faces numerous challenges, primarily due to its heavy reliance on imported vehicles and the volatile currency exchange rates. Asset financing emerged as a solution to alleviate the financial burden on drivers, but it has encountered several obstacles along the way.

With an estimated population of over 200 million people, Nigeria's motorisation rate stands at a mere 0.06 vehicles per person. The majority of vehicles on Nigerian roads are imported, contributing to the country's economic strain due to the dependence on foreign currency. The recent depreciation of the Nigerian naira against the US dollar has further exacerbated the situation, making vehicle importation even more expensive.

Ride-hailing drivers bear the brunt of these challenges, as their livelihoods depend on affordable access to vehicles. The fluctuating exchange rates directly affect their expenses, including fuel and spare parts, making it increasingly difficult to sustain their businesses. Additionally, the cumbersome clearing processes at ports and high import duties add to their financial burden, hindering their ability to own vehicles outright.

To address these challenges, asset financing firms have introduced rent-to-own models tailored to ride-hailing drivers. These models allow drivers to make manageable down payments and spread the remaining cost over several years. However, despite good intentions, the asset financing scheme has faced its fair share of criticisms and setbacks.

While asset financing initially seemed like a viable solution, it has encountered several obstacles along the way. Reports of overpriced vehicles, complicated payment structures, and safety concerns have surfaced, raising doubts about the sustainability of the model. Additionally, drivers express apprehension about the long repayment periods, fearing that the value of the vehicles may depreciate significantly over time.

Amidst these challenges, the question arises: Can local manufacturing companies offer a sustainable solution to Nigeria's mobility sector woes? While Nigeria currently relies on imported vehicles, there is potential for local manufacturing to rebalance the market and provide more affordable options for drivers.

Although Nigeria has limited local car manufacturing capabilities, companies like Innoson and Ford have made strides in assembling vehicles domestically. Innoson, in particular, offers affordable models like the Innoson Carris, priced lower than imported alternatives. With the possibility of local manufacturers offering discounts to ride-hailing drivers, there is potential to make locally assembled vehicles more accessible and appealing.

In a tech-savvy world where consumers are increasingly open to local alternatives, there is an opportunity for Nigerian car assembly companies to capitalise on this trend. By promoting locally manufactured vehicles as reliable, affordable, and supportive of the local economy, these companies can attract more drivers to their offerings.

The challenges facing Nigeria's mobility sector are complex, but not insurmountable. By exploring solutions such as local manufacturing, the country can create a more sustainable and equitable environment for ride-hailing drivers. With the support of local manufacturers and favorable policies, Nigeria can overcome its dependence on imported vehicles and foster a thriving automotive industry.

Source: Techcable