Much noise has been made and continues to be made about Nigeria’s magic auto policy. By the way, I found what I think is a copy of the policy at the National Automotive Council’s website here. Nothing new in there except that I found an admission that prices will rise (page 105) even though the government continues to deny it. There’s also a lot of exclamation mark usage as if to drive home the point. But that is neither here nor there.
So a few days ago, the Director of Policy and Planning in the National Automotive Council, Lukman Ahmed, gave Nigerians this wonderful news:
The National Automotive Council on Tuesday announced that plans had advanced for about 30 vehicle manufacturing plants to open business in the country.The Director, Policy and Planning, Lukman Mahmud, said this was in line with the Federal Government’s plan to ensure local production of vehicle components begins in-country.The arrangement would ensure the distribution of vehicle parts through the Nigerian automotive industry at competitive prices, to create employment opportunities for the people.Prior to the introduction of the National Automotive Industry Development Plan by the Federal Government in 2013, the country had 14 existing plants at different locations in the country.According to Mr. Mahmud, the provision of incentives and protection to the industry under the new auto policy persuaded 16 fresh companies to establish their assembly plants in the country.
This is fantastic news indeed. Especially because many countries are dying for this kind of investment. As I have said previously, some countries actually bribe car manufacturers to come and setup plants in their country. In terms of investments, a vehicle manufacturing gig is one of the best ones a country can hope to have. It’s not just the jobs it creates, but the quality of those jobs as well. Workers get trained in very useful skills and a single vehicle plant can be the economic lifeblood of a town for decades. Here in the UK, if you take Nissan out of Sunderland, devastation is what you will get in its wake.
Yet Nigeria, simply by publishing a document, is now in danger of being overrun by so many manufacturers who want a piece of the action. The fact that Toyota felt the need to publish a disclaimer in the papers need not detain us here. They are simply haters who wont know a good investment if it landed on their lap.
Be that as it may, I want to do a quick comparison around the world of investments in car plants just so we know what we are getting in Nigeria. That way if, God forbid, things don’t go according to Aganga’s plan, we can at least know where things went wrong.
As we know, Nissan has been the first out of the blocks to start ‘making’ cars in Nigeria under the ‘Proudly Nigerian’ slogan. Thankfully, when carmakers announce new plants in a country, they tend to issue a press release about it which summarises their plans and what they hope to achieve. With that in mind, let’s sample some Nissan announcements.
On y va Brazil
In January Nissan announced a new engine plant in the Resende Industrial Complex in Rio de Jainero [emphasis mine]:
Nissan will invest R$140 million in the construction of the engine plant and will generate approximately 200 direct jobs. The industrial unit will use an existing building adjacent to the Vehicle Plant and will begin its activities with the production of the 1.6-liter, 16V I-4 flexfuel engine, with 111 hp and torque of 15.2 kgfm – when using ethanol – one of the most efficient in the Brazilian market.
Also this bit
The local production of engines makes the project of Nissan’s Industrial Complex in Resende a complete center. With investments totaling R$2.6 billion (U.S. $1.5 billion), the industrial unit will be one of Nissan’s most sustainable in the world, and will originate in 2014 two Brazilian cars: Nissan March and Nissan Versa.
On y va Thailand
Only a couple of weeks ago, Nissan announced its second plant in Thailand to produce the Navara:
Nissan today announced the opening of its second production plant in Thailand. The new plant will be a production hub for the NP300 Navara, Nissan’s new generation pickup truck, destined for export to 45 countries around the world. Thailand is a key market for Nissan, an integral part of their growth strategy in Asia. The country now boasts two plants and an R&D facility, and is increasing in importance as the company’s Asian hub for exports and manufacturing. Nissan has invested 3.7 billion Thai Baht ($116m) in the 580,000 square meter facility, bringing with it 2,000 new job opportunities. Full production capacity is expected to reach 150,000 units per annum.
Nissan has also invested 162 million Thai Baht in the new plant’s zero discharge program, and will recycle all industrial wastewater through the Reverse Osmosis (RO) process. Nissan will continue to provide training to subcontractors and employees to raise the awareness of waste management and resource reduction
On y va Mexico
In June, Nissan announced an alliance with Renault and Daimler to build a new plant in Aguascalientes, Mexico:
Renault-Nissan CEO Carlos Ghosn and Daimler CEO Dieter Zetsche announced today that their companies have agreed to establish a 50:50 joint venture, the business entity that will oversee construction and operation of the new plant in Aguascalientes in north-central Mexico. The new plant will be built in the immediate vicinity of an already existing Nissan plant and will have an annual capacity of 300,000 vehicles when fully ramped up.
Start of production is planned for 2017 with Infiniti models. The production of Mercedes-Benz brand vehicles will follow in 2018.
Daimler and Nissan will share the total investment cost for Aguascalientes of approximately €1 billion. The companies will add almost 5,700 jobs (including engineering, line workers and support staff) by the time the plant reaches full capacity, expected in 2021. In addition, a high localization rate will significantly increase the Mexican supply base
In November, Nissan opened the first stage of a US$2 billion manufacturing complex in Aguascalientes. This increased Nissan’s total capacity in Mexico to more than 850,000 vehicles annually
On y va Indonesia
In May, Nissan announced the opening of its second plant in Jakarta:
Nissan today inaugurated its new manufacturing facility in Indonesia. The second plant in Purwakarta, Indonesia, represents an investment of 33 billion yen (US$325m) and is a significant step forward for Nissan to become a leading brand in the country. The investment is also an important part of the company’s market expansion plan stated in its six year mid-term business plan, Nissan Power 88.
The 60,000 m2 facility includes body assembly, paint, trim and chassis operations. With the expansion, Nissan increases its production capacity in Indonesia from 100,000 units per year to 250,000 at full ramp-up. The new plant will generate up to an additional 3,000 jobs in the region.
On y va China
Two years ago, Nissan announced a new plant in Dalian, China under its joint venture programme with Dongfeng Motor Company:
Dongfeng Motor Co., Ltd. (DFL), Nissan’s joint venture in China, today announced it will build an all-new manufacturing facility in Dalian, Liaoning Province, China with an investment of up to RMB 5 billion (USD $800 million). The Dalian plant, scheduled to begin manufacturing NISSAN-branded passenger vehicles, will have an initial annual production capacity of 150,000 units by 2014, and will expand up to 300,000 units.
On y va Russia
Also in 2012, Nissan announced a new plant in St. Petersburg, Russia:
Nissan is targeting a 10% share of the rapidly growing Russian market by 2016 (up from 5.9% today) which will be achieved by tripling annual sales from the 2011 total of 161,000 units.
To support this, capacity at the St Petersburg Plant will double to 100,000 units in 2014FY The announcement follows last year’s capacity increase at the plant which currently manufactures the Teana sedan, X-TRAIL SUV and Murano crossover, to 50,000 following the introduction of a third production shift.
Nissan will now invest a further €167m to add 50,000 square metres of new production facilities, including Press and Plastics Shops. As well as bringing total plant capacity to 100,000 units, the expansion will enable St Petersburg to produce up to five different models simultaneously
On y va India
In 2010, Nissan started production at its new plant in Chennai, India. As usual, it announced it:
The plant at Oragadam, spread over an area of 640 acres, represents an investment of 45 billion Rupees ($990 million) and the capacity to produce 400,000 units per year at full ramp up. Today, the plant employs 1,900 workers and will reach 3000 in two years time. The company, along with its supplier park in Chennai, estimates a total of 6,000 jobs to be created in the region.
Ok I can see you rolling your eyes which tells me you are getting bored with all these. So one last one
On y va Portugal
Five years ago, Nissan announced a new plant in Aveiro, Portugal to produce car batteries:
Under the agreement with the Government of Portugal, Nissan will invest over €160 Million in the new facility and directly create 200 new jobs at the plant. This investment follows the announcement in November 2008 that Portugal will work with the Renault-Nissan Alliance to implement a zero emission mobility program from 2010. Within this plan, the Alliance will supply its electric vehicles from January 2011, and the Portuguese government will leverage an extensive network of 1,300 planned recharging stations that will be installed across the country over the coming two years
All the press releases are taken from Nissan’s websites. Feel free to click on the links. Now that we have been around the world and have a decent idea of how Nissan announces production in a country, we only need to compare these with their announcement in Nigeria. Apologies, but I will paste the whole press release from April this year below:
Nissan today became the first major manufacturer to build a car in Nigeria in response to the introduction of the new Nigeria Automotive Policy.
The inaugural vehicle, a Nissan Patrol, rolled off the production line at the Lagos assembly plant, marking a key milestone in the company’s continued wave of expansion into high-growth markets.
Nissan is targeting significant growth in Africa as the company builds momentum towards achieving its Power 88 goals, a commitment to reach 8% profitability by the end of fiscal year 2016. Elsewhere in the world as part of the high-growth markets strategy, plants have been opened in Mexico and Brazil with projects underway in Indonesia, Thailand and China. Last year Nissan announced it will be the first manufacturer to build cars in Myanmar, after the opening up of the economy in the south-east Asian country.
The first “built in Nigeria for Nigerians” Nissan Patrol follows the signing last year of a Memorandum of Understanding for vehicle assembly in Lagos between the Renault-Nissan Alliance and West African conglomerate Stallion Group.
Since then, preparing for production in Nigeria to global production standards has been achieved at a rapid pace, setting a new benchmark in responsiveness and organisational agility.
Takashi Hata, Nissan Senior Vice President and Chairman for the Africa, Middle East and India region said: “For Nissan, Africa is our strategic growth driver. Demand for cars is growing quickly in African markets as demonstrated by the first model being produced a mere seven months after the announcement of the new Automotive Policy. By acting quickly to begin production in Nigeria we are securing for ourselves first-mover advantage.”
Nissan South Africa Managing Director Mike Whitfield, who also heads up Nissan’s Sub Sahara Africa region, is delighted with the successful launch of the first Patrol. “Nissan was a pioneer in the foundation of the car industry in South Africa. Now we are once again at the forefront of manufacturing in Africa, this time in Nigeria where we see huge potential. We want to play our part in the economic growth of Nigeria and Africa.”
The rollout of the first Nissan vehicle comes shortly after confirmation that Nigeria’s booming economy has now overtaken that of South Africa. Africa’s most populous country is pivotal to Nissan’s mid-term growth plan, which seeks to double sales on the continent by FY2016, up from 110,000 units at the end of FY2012.
Nissan’s growth strategy in Africa gained momentum with the introduction this year of Nigeria’s new Automobile Industrial Policy, aimed at stimulating development of the auto industry in the country.
“We are grateful to the Nigerian government for implementing automotive legislation that is conducive to investment and that was instrumental in our decision to open an assembly plant in partnership with the Stallion Group, already our exclusive distributor in Nigeria,” added Whitfield.
Nissan anticipates vehicle demand to increase in this oil-rich country, which is seeing a rise in fast-growing industries including finance, retail, communications and film.
In addition to the Patrol, Nissan also plans to produce the Almera and NP300, starting in early May and followed by mass production in August. With these three models, Nissan aims to be a significant player
Hmmm. What’s going on here? Where is the money? From what we can see from all the examples above, a car plant is a serious investment and costs a lot of money. And Nissan never fails to tell you how much it has invested or plans to invest in the future. But these rules have been suspended in Nigeria – without investing anything, Nissan has managed to roll out cars ‘built in Nigeria for Nigerians’.
There is no mystery here – no investment has been made in the country. This auto policy has handed them a captive market without any upfront commitment from them in terms of hard cash. Nigerians should remember this in future when they are tempted to complain about ‘foreign companies ripping us off’. If you were Nissan, would you do different? Simply by removing the tyres before importing and then adding them back when the cars land in Nigeria, you have qualified as a ‘car manufacturer’ in Nigeria. Even the plant where this ‘assembly’ is going on in Lagos was already assembling buses long before the noise of this ‘auto policy’ started.
It’s not even the end of the world if things like this happen. Anyone is free to come and build cars in Nigeria without investing anything. Good luck to them. But to make a song and dance about how your ‘policy’ is causing a stampede of investors and then – adding insult to injury – raising tariffs on Nigerians in the name of this briefcase investment is completely ridiculous. When you see carmakers coming to invest in Nigeria, you will know. And the government will need to back up such investments with more than a badly written piece of paper.
As usual, we have turned a serious matter into a joke. Something which costs hundreds of millions of dollars in other countries has ‘transformed’ into a thing so trivial that 16 manufacturers are coming to Nigeria to just be littering the country with car plants. We know how this movie is going to end.
Left to Ifeanyi Ubah, Chief Cosmas Maduka is doing nothing more than ‘pure water business‘. But credit where credit is due, the man has been selling cars in Nigeria for a while and probably knows a thing or two about how the industry works. Recently he gave an interview to CNBC Africa on the ‘auto policy’ and after starting off by pledging his loyalty to said policy, he let slip his real thoughts on the thing. The video is here
Around the 4 minute and 20 second mark, you hear him say ‘we should not do things just to get attention‘ in reference to the auto policy. Or perhaps the minister.
Maybe this is what this is all about then. In which case, nothing much to worry about as the policy will probably die a natural death after the elections next year. Vote wisely because your vote will not be refunded if you hand it to anyone on the expectation that 30 car plants are going to start production in Nigeria.