Auto parts makers list challenges as NADDC, AAAM tour factories

 

 

 

 

The international collaboration between National Automotive Design and Development Council (NADDC), and the South Africa-based African Association of Automotive Manufacturers (AAAM) deepened last week when their combined team toured auto component manufacturing factories in parts of Nigeria.

In focus was the need to ascertain the challenges hindering development in the local auto parts manufacturing industry with a view to addressing them, and repositioning the subsector to properly assume its role as a critical linkage to vehicle manufacturing plants in the country

This is in obvious recognition of the fact that local content development is a vital component of the Nigerian Automotive Industry Development 2023-2033 which implementation committee was inaugurated a few months ago.

Giving insight into the familiarisation tour, NADDC’s Director of Research, Design and Development, Dr. Fidelis Achiv, said “The objective of their {AAAM} visit is to explore partnership opportunities for collaboration and investment in the automotive sector of the Nigerian economy.”

Not surprisingly, at all the factories on the itinerary on day one which covered Lagos and the environs, the NADDC/AAAM team was presented with a surfeit of challenges, including very low patronage related low volume of production that discourages investment; and inconsistency of government policies.

The complaints of the auto parts that recurred during the tour also included duty differential that encourages influx of cheaper, but sub-standard imported finished products (against high duty paid on raw materials); and bottlenecks imposed by the Customs at the ports during clearing of goods needed for local production, among others.

At Mikano International Motors Division on the outskirts of Lagos; Vitaparts Nigeria Ltd; Vitavisco Nigeria Ltd (both subsidiaries of Vitafoam Nig PLC); and Kewalram Chanrai Group; the aforementioned challenges were voiced, in different orders, as interpolating to militate against auto parts production in their respective facilities.

However, both the CEO of AAAM, Mr. Dave Coffey, and the Director General of the NADDC, Joseph Osanipin, were impressed with the array of machinery installed for the manufacture of a wide range of top quality brake pads (for different vehicles) at Milano’s Karameh City mega factory complex.

The Mikano factory has the capacity to produce at least 8,000 brake pads a day or about 200,000 pieces in one month of 25 work days – running a single shift.

This means that the output could be doubled or tripled with more shifts, if demand rises.

However, both Ayman Hamadeh and Mahmud who spoke to the visitors on the Mikano brake pads, lamented that the factory is presently utilising a very low percentage of its installed capacity and supplying only to the aftermarket for replacements.

Either due to very low productivity or lack of awareness, no local assembly plant is taking the Mikano brake pads.

The story was not different at Vitafoam PLC’s Vitaparts in the Iju-Ishaga area of Ogun State where the Business Manager, Udoka Abanobi, disclosed that the factory produces 60,000 oil filters a month even though its machinery can manufacture at least 250,000 units per month running a single shift.

Vitaparts, which commenced operations in 2021, has filter model references for Toyota, Kia, Hyundai and Suzuki, with a twin factory dedicated to the fabrication of the steel components of the filters.

However, Abanobi said the filters face fierce and unfair competition from cheaper imported, but poor quality, products that take advantage of duty differential that favours importation, to enjoy price edge.

“Our filters have a capacity of 20,000 kilometers, surpassing the 3,000-5,000 kilometer range of most market filters.” he added.

He, therefore, appealed for an adjustment in tariff that would reverse a situation where importation of steel for

The pitiable situation at the related Vitavisco Nigeria Ltd is a true reflection of the state of Nigeria’s Automotive industry, because the company was established to manufacture moulded vehicle foam seats for assembly plants, but due to abysmally poor patronage, has diversified into making other products to keep the facility running, rather than shut down.

Vitavisco Managing Director, Joseph Itopa Musa, bemoaned the low patronage for the company established in 2012 with the capacity to produce 1,500 pairs of foam seats (for vehicles) running a single shift.

Musa called for the stimulation of patronage and creation of clement operating environment for the auto plants in Nigeria, hoping that with increased production in their plants, they would turn to Vitavisco for seats and related products.

He underscored the need for government support and credit schemes to encourage patronage and enhance local vehicle production

The Vitavisco Managing Director also expressed optimism about the government’s potential initiatives to address these challenges, which would enable his company to serve the Nigerian market effectively.

At Kewalram Chanrai, a group of companies that has been operating in various sectors of Nigeria’s economy since 1900, the guests were informed that its many subsidiaries have been producing a long line-up of items based on strict local content policy, except in the auto sector..

The visitors were welcomed on arrival with a presentation made on behalf of Kelwaram Chanrai Group {KCG} by A Director, Sudeep Mittal.

In his remarks, the Managing Director, Anil Sahgal, disclosed that owing to low patronage and the resultant low volume of production at the plant where Isuzu, Foton and Piagio (tricycles) are assembled, the target of achieving high local content in the auto division has been a mirage.

Commissioned in April, 2016, the Kewalram Chanrai plant in Isolo, Lagos, was equipped to assemble in one year 12,000 Foton and Isuzu trucks, 30,000 mini buses and cars, 36,000 three-wheelers (Keke) and 120,000 motorcycles on SKD (semi-knocked down) basis.

When the visitors went to the plant, guided by the Plant Manager, Harry Ijeh, it was observed that production has gone skeletally thin with very little happening.

It was learnt that the plan at the inception of the Kewalram Chanrai plant was to later move from SKD to Completely Knocked Down (CKD) production in order to increase local content, if an appreciable volume could be achieved.

In separate remarks, both the Executive Director Sunday Hart, an engineer, and Sahgal called for measures on the part of the Federal Government to support the production of vehicles in Nigeria, including through patronage and the introduction of a tariff regime that will favour assembly plants.

Sahgal described as “tight corner” a situation whereby the size of the market for light trucks in Nigeria (where the Isuzu range belongs) is less than 500 units a year for all the competing brands, while at least 2,000 units are needed to invest in CKD production with local value addition in the local assembly of Isuzu alone.

“Isuzu (KCG’s partner) is saying that CKD assembly is only viable if we can produce 2,000 units of light trucks a year. But, how can we make investments for 2,000 units here alone when the sales for the whole market are less than 500?” Sahgal asked, pointing out that the future of the industry in Nigeria is “in local content development.”

Hart appealed to the government to take “a determinist approach” to addressing the challenges in the auto industry and promoting local manufacturing, because if we throw it open for all comers, it will be difficult to sustain our kind of investment.”

Hart and Sahgal assured that both Kewalram Chanrai and Isuzu were ready for more investments, but would like to see consistent government policies aimed at boosting production of vehicles by the auto plants in Nigeria.

Responding to the comments, the NADDC DG assured that having heard the challenges highlighted, he would take steps towards addressing them in conjunction with relevant government ministries and agencies.

Apart from feeling the pulse of the auto parts makers, Osanipin had earlier during the tour explained that the familiarisation tour by NADDC and its partners from South Africa was intended to help assess the capabilities of the manufacturers, “know what is on ground” and link them with the assembly plants.

“Currently, their products go to the aftermarket, which is where the volume is. But, some of the OEMs {original equipment manufacturers} said they are not aware of the existence of some of the component manufacturers, and we have discussed with them,” the Director General disclosed.

According to him, the coming of AAAM, an umbrella body of global auto brands manufacturing vehicles in Africa, was part of the efforts to link the auto parts makers to the OEMs. AAAM, which was represented by Coffey and some top officials, also works with African governments to develop and implement automotive policies and ecosystems.

The NADDC DG was accompanied by Dr. Achiv, and the officer in charge of the auto desk at the Federal Ministry of Industry Trade and Investment, Samuel Adetoro.

With Coffey on the first day of the tour were Ghana-based Victor Sarpong, in charge of the ECOWAS region for AAAM, and Victoria Backhaus-Jerling from the VDA.

Also part of the AAAM delegation was Gerhard Braun and Jaya from the ZF Group, as well as Ayobami Ogunleye from the Bosch office in Nigeria.

 

Before returning to South Africa, Coffey was satisfied that the AAAM’s mission, which was “to familiarise ourselves with the automotive component manufacturing and assembly capability of Nigeria,” had been accomplished.

He described Nigeria as a huge market, and called for policies that would boost assembly of vehicles in Nigeria and encourage the production of local content.

The familiarisation tour took the NADDC-AAAM team to the northern, and the eastern parts of the country on the second and third days, where they visited Innoson Vehicle Manufacturing Company Ltd {IVM} in Nnewi, as well as Innoson Technical and Industrial Company Ltd, Emene, Enugu,

They also visited the site of an upcoming Innoson tyre factory, located not too far from from Innoson Technical in Enugu.

While in the east, the visitors also toured ANAMMCO in Emene, Enugu, before flying to Kano and Kaduna where, among other places, they visited PAN Nigeria..

 

 

 

 

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