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High tariff: Car imports drop by 70%

By on July 31, 2015

Automobile importers and dealers are currently experiencing a tough time as the implementation of the 70 per cent import tariff on cars is taking a heavy toll on their business.

Findings by our correspondents at the Lagos ports and dealers’ showrooms on Wednesday revealed that vehicle imports had dropped by about 70 per cent just as sales had tumbled by over 60 per cent.

One of the two major terminal operators for imported vehicles at the Lagos ports, Five Stars Logistics Limited, is said to be operating skeletal services, while the other, Ports and Terminal Multi-Services Limited, has reportedly laid off half of its entire workforce due to the low volume of car imports.

The Federal Government had raised the import duty on cars (old and new) from 22 per cent to 70 per cent to discourage importation of vehicles under its National Automotive Development Plan.

And to encourage the establishment of vehicle assembly plants, existing local auto companies are allowed to import completely knocked down parts at zero per cent as well as bring in a number of the fully built units at a concessionary duty rate.

Although the National Automotive Council said about 27 auto firms had signified their intention to establish assembly plants in the country, many have yet to start operation. Those operating are reportedly producing far less units than the local demand.

A report obtained from the Seaport Terminal Operators Association of Nigeria on Wednesday showed that the vehicle imports, both old and new, had continued to drop since the commencement of the 70 per cent import duty on cars last year.

For instance, the number of vehicles imported through the Roll on Roll off terminals of the Lagos port dropped by 70 per cent from 27,000 units in January 2014 to 8,000 units in January 2015.

A similar drop was reported by the Nigerian Ports Authority in its shipping position published daily on its website. It indicated that while 1,505 units of vehicles were imported through containers in other terminals in the second quarter of 2014, only 415 units of vehicles were discharged in other terminals for the second quarter of 2015. This represents a decrease of 72 per cent.

The volume of trucks imported in 2014 through the RoRo terminals also dropped from 2,700 units to 1,700 units this year. This shows a drop by 32 per cent.

Following the increase in the tariff on imported vehicles, car dealers have also raised their prices to reflect the rise. The increase, it was learnt, ranged between 20 and 50 per cent, depending on the brand of vehicle.

The result, according to dealers, is poor sale. For instance, a senior manager at Elizade Nigeria Limited, a major dealer in the Toyota brand, told our correspondent that the volume of sales had dropped by over 60 per cent from 9,000 units to 3,500 vehicles in the last one year.

He said many fleet buyers had cut down considerably on the number of vehicles they were buying because they could not afford to pay for the units they previously bought.

He also attributed the high cost to the value of naira that had depreciated against major international currencies.

A marketing manager for one of the major car dealers, who spoke on the condition of anonymity, said virtually all dealers had upwardly adjusted their prices, adding that it cut across all vehicle segments.

He said, “The price increase cuts across most of the franchise holders, including the market leader, Toyota.

“For instance, a Kia Picanto manual transmission, which cost N1.96m in January this year, is now being sold for N2.39m.”

A price list for Toyota brand of vehicles obtained by our correspondent on Wednesday showed that the Yaris, previously offered for between N3.2m and N3.48m, was now being sold for between N4.5m and N4.8m.

The price of Corrolla 1.8 GLi, which went for N4.67m in the early part of the year, has increased to N5.74m. The prices of a new Corolla 1.8L fabric and leather seat variants were given as N7.2m and N8.3m, respectively.

The price of a Toyota Land Cruiser Prado VX, which before now was N15m, has risen to N18m.

The spokesperson for STOAN, Mr. Bolaji Akinola, said NAC was creating a hard time for the terminal operators.

He described their travails as ugly consequences of the last administration’s “ill-conceived and hastily implemented policies on the importation of used vehicles.”

Although he declined to give specific details about the situation at the RoRo terminals, he confirmed that the operators were struggling to keep afloat.

Akinola said, “This year has been especially tough for the RoRo terminals; they are struggling to survive. Other terminals too are also experiencing a hard time. This is all due to the government’s policies on the importation of cars, rice and fish. Importers will continue to smuggle in cars if the government makes it too difficult for them to import vehicles legitimately.

“Currently, local production capacity of automobiles by all the assembly plants in the country today stands at 60,000 units per annum, while the demand stands at 750,000 units per annum. Imported second hand cars have an average price of N1.5m, while the cheapest locally assembled car sells for N3.5m, more than twice the price of the second hand cars.”

 

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