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  • Business - Companies
  • Updated: November 24, 2020

Innoson, Kano Cars Threaten Toyota's Grip With Buhari's New Policy

Innoson, Kano Cars Threaten Toyota's Grip With Buhari's New

A year after Toyota snubbed President Muhammadu Buhari's request, the government has created a new policy that could push local automakers like Innoson and National Truck Manufacturers Limited, popularly known as Kano Cars, ahead of Toyota on government's wanted list.

Innoson and National Truck Manufacturers Limited are set to leapfrog Toyota vehicles in the heart of the Nigerian government, as the country is aiming to stop acquisition of cars not assembled within Nigeria. It is a new policy that the government is pushing to support locally assembled vehicles. The restriction doesn't apply to all citizens, but on government looking to increase their fleet of cars or change their vehicles.

Toyota has been enjoying patronage from the Nigerian government over the years, with the most recent purchase being Toyota Camry 2020 model cars in March 2020 by the House of Representatives who agreed in Febraury this year to purchase 400 units of the exotic cars. According to Punch, the Toyota vehicles were allocated to 360 members of the House of Representatives, special advisers, assistants, and some top staff in the chamber.

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But with the new policy of the government, such purchases will be restricted to Nigerian made or assembled cars, thereby, reducing the pressure on forex and keeping the cash in the Nigerian economy, rather than investing the capital in another country's economy.

Is New Policy Aimed At Tackling Toyota 'For Snubbing Buhari'?

Toyota ship its vehicles in whole into Nigeria from South Africa and other countries where its assembly plants is located. While the government said the new policy is meant to ensure competitiveness within the Nigerian market for locally assembled vehicles, this also pushes Toyota to the backseat on government's patronage list.

The new policy comes a year after Toyota snubbed President Muhammadu Buhari's request to set up their assembly plant in Nigeria. Toyota ignored the request, instead, announcing a deal between Ghana and the company in September 2019, to establish Toyota vehicle assembly plant as the trade point for West Africa.

Toyota also chose Ivory Coast for its assembly plant, leaving Nigeria out of its plant locations. This means Nigeria will have to depend on Ghana, Ivory Coast and South Africa for importation of Toyota vehicles, and with the African Continental Free Trade Agreement (AfCFTA) in sight, Ghana and Ivory Coast economy will receive a major boost as demand for Toyota cars in West Africa will lead to capital and job creation for both countries.

It is a significant loss for Nigeria, a country where annual demand for cars is about 720,000 vehicles, but only 14,000 are produced locally - and Toyota has an higher demand in Nigeria, especially among Nigerian government; Federal, State and legislature.

New Policy Good For Innoson, Kano Cars....But!

Innoson is a local vehicle assembler, shipping its vehicle parts from China, just like Kano Cars as well. Both assemble their vehicles in Nigeria, making them the only indigenous local automaker. The patronage of the government will cause an increase in their production, and hike in earnings after the policy become effective.

Patronising Innoson and Kano Cars will not only favour the companies, but also boost the economy, as increased production will create more job opportunities in the vehicle market in Nigeria. However, Innoson and Kano Cars are not the only assembler in Nigeria, as there are Honda and Peugeot assembly plants in Nigeria. Also, VW and Nissan are reportedly planning to set up their plant in Nigeria.

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Aside from competition from foreign vehicle assemblers in Nigeria, there's also the issue of the duties on imported automobiles which was recently cut by President Buhari. he reduced the duties on imported automobiles to 10% from 35%. This is expected to reduce the cost of imported cars into Nigeria.

While justifying the reduction in imported car duties, Vice President Yemi Osinbajo said, “At current rate of production, we will not meet the serious national needs, which mean higher prices of vehicles and greater strain on other sectors of the economy that depend on transportation,” Osinbajo said, adding that, “With subsidy removal and the increase in fuel price and the pass-through to food prices, transportation costs have to be reduced.” He was quoted by Bloomberg.

The previous 35% tax was placed in order to support growth of locally asembled vehicles - but the reduction will be a challenge for the likes of Innoson and Kano Cars, both of which will have to review prices if they expect to remain competitive in a market saturated by imported vehicles.

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