Vehicle acquisition scheme, rising cost of imported cars’ll boost auto policy –Boyi, PAN MD

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By Moses Akaigwe

Ibrahim Dutsinma Boyi, the Managing Director of Peugeot Automobile of Nigeria (PAN), Kaduna, is a 1984 graduate of Ahmadu Bello University, Zaria, with BSc. in Accounting. He also holds an MBA from ESUT Business School, Lagos. With over 24 years of practical experience gained in the energy sector (oil, gas and power) across the West African sub-region, Boyi is charged with the responsibility of revitalising the Peugeot plant that was once the pride of the nation’s automotive industry.

The alumnus of the prestigious INSEAD, France, Lagos Business School and Thunderbird Institute of Management, Phoenix Arizona, USA, spoke to the Daily Sun recently, addressing issues such as why the Peugeot brand lost its leadership position in the local market and efforts being made to return it to the forefront of autombile manufacturing in the country. He also spoke on the replacements for the good old 504 and 505; the implementation of the automotive policy; and imported second-hand vehicles (tokunbo) into the country.  Excerpts:

The peugeot brand

Many factors could be attributed to the loss of leadership of PAN in the market space, chief of which is government’s reversal of its auto industry development plan conceived and launched in the 1970s. The policy, as part of the National Industrial Development Plan (NIDP), was aimed to create and develop local industrialisation, with auto industry as an anchor industry to consume products of the petrochemicals and steel industries, among others.

OEMs (Original Equipment Manufacturers) were encouraged to invest in auto plants, which saw the birth of Peugeot (PAN) in Kaduna, VWoN in Lagos, Leyland in Ibadan, Steyr in Bauchi, ANAMMCO (Mercedes trucks/buses) in Enugu and NTM (Fiat trucks) in Kano. These auto plants flourished and provided the vehicle requirements for not just Nigeria, but also exports to West Africa. During the efficacy of the policy, government and Nigerians only patronised locally assembled products as prohibitive tariffs were imposed on imported vehicles, both used and new. The auto industry directly employed more than 200,000 workers directly in the plants. This did not include the thousands employed by local component parts manufacturers, dealerships and after-sales networks, logistics providers and clearing agents.

However, in mid 80s the government of the day embraced economic and free trade liberalisation policies, which meant removal of protection and withdrawal of incentives for local manufacturing in favour of imports. With decaying and inadequate infrastructure in terms of electricity, rail, security and skilled manpower, local firms could not compete with imports from environments supported by their governments with efficient infrastructure. This was the beginning of the down-turn of not just the auto industry, but the whole manufacturing industry in Nigeria. Factories closed, jobs were lost in favour of importation and trading.

PAN that had held the leadership position for passenger cars started to lose market share to the imported brands. All the auto plants set up in the 70s closed shop, except PAN that had remained resilient and operational till today.

State of plant in Kaduna

The government’s realisation of the damage the policy reversal had caused to the economy and the instability and un-sustainability of reliance on oil as the main driver of the economy certainly fuelled the re-introduction of the National Auto Industry Development Plan (NAIDP) in 2013. This policy offered local auto plants like PAN, NTM, ANAMMCO, Innoson, Nnewi and VWoN, a new lease of life and created opportunities for new players to invest in Nigeria. The policy is also the reason why there was a rush of interest in the Nigerian auto industry by new investors and OEMs

With its infrastructure, experience and technical expertise, PAN quickly keyed into NAIDP and re-entered into new SKD (Semi-Knocked Down components) and CKD (Completely Knocked Down components) contracts with our technical partners, Peugeot France. In July 2014, the new and award winning Peugeot 301 model rolled off our plant in Kaduna. This was quickly followed up by the luxurious Peugeot 508.

To aid our market recovery, we also embarked on key activities in re-energising our after-sales support and training and delivery of modern and latest auto maintenance and repairs skills to the technical staff of our network partners through our fully accredited training center.

To tackle competition, PAN introduced functional, comfortable and reliable brands targeted at key segments of the market, including the buoying SUV segment. These Peugeot models come along packed with latest options for ease of operation, comfort and safety.

As a result of our local infrastructure, we were able to draw on the incentives offered by the NAIDP to offer the cheapest vehicles to the market in terms of overall value and cost of ownership. We also streamlined our spare parts supply chain to ensure our customers access genuine spare parts through our expanded channels of accredited distributors across the country. Peugeot spare parts come with three months warranty when bought through our accredited channels.

To further strengthen our market presence, we also reviewed and rationalised our dealership network to ensure that our customers have very easy access to the network, but that also the network will be able to deliver the brand promise of motion and emotion to the customer.

These efforts are yielding massive results and we have been able to reconnect the brand’s heritage and emotions of the 70s and 80s to present day. Increased sales activities will mean more dealership and after-sales centres, more spare parts distributors and will also increase industrial activity, boost employment and recreate local component manufacturing. This road map will be concretised by the diligence and commitment of the government in implementing the NAIDP.

PAN is ready to blaze the trail by its imminent plan to commence CKD production of the Peugeot 301. This will lead the way for growing local component industry, skills, technology and innovation and the long sought after ‘Nigerian car’. Yes, the good old days will be back again for PAN, its stakeholders and Nigerians.

Replacements for 504, 505

The qualities that stood out the 504 and 505 were reliability, durability, ease of maintenance and price. These are values and qualities that are in the DNA of all Peugeot cars. It is inbuilt in the design and engineering of all Peugeot vehicles.

The new generation of Peugeot cars in the market now such as the 301, 508 and 3008 are built with such qualities. With less than five years since its entry into Nigeria, the Peugeot 301 won the Car of the Year for 2016. As you may also know, the newly introduced 2017 model of the 3008 SUV has already won the European Car of the Year 2017.

Since the 505, Peugeot had introduced other popular brands into the market such as the 406, 307 and 206. These vehicles still evoke love and deep customer attachment. We are very confident that as our customers switch to the newer models of Peugeot 301, 508 and the 3008, such loyalty, love and emotion will follow.

Privatisation: Blessing or curse?

Privatisation as a principle and strategy for improving performance and competitiveness of government enterprises is proven and will always deliver the desired results if implemented properly. If privatisation fails, then we must look closely at the process and we will find the reason or cause of its failure. Personally, I will always advocate for privatisation. But it must be conducted professionally and transparently. The rules must be clear and applied dispassionately. The key elements of financial, technical and managerial competencies must be proven and upheld.

Relationship with Peugeot France

The relationship is blossoming and waxing stronger. With the NAIDP, Peugeot France has renewed its interest and commitment to Nigeria and PAN.

Auto policy

The auto industry of any country will only develop with an active government policy direction. Nigeria possesses the main pillars to underpin a successful automotive industry; its economy, geographical location and its market size. We are confident that Nigeria’s auto industry will rebound and exceed its 80s performance in terms of contribution to GDP once government diligently implements the auto industry development policy.

Has auto policy failed?

I will not agree that the auto policy has failed due to low production volume and car prices. The auto industry is not and will not operate outside the national economy. Nigeria’s economy went into recession last year and all sectors of the economy took a hit. Even less-import dependent and mature industries such as cement and agro-based businesses, were not spared.

If the auto policy has not achieved some of its policy objectives, it is also because the levers of the policy were not all raised simultaneously. Some levers that were not raised include the vehicle acquisition finance scheme, imposition of levy on used cars and non-manufacturers and control of smuggling of used and new vehicles.

The policy will also achieve its objectives faster when it is enforced against uniform standards with controlled migration from SKD to CKD within defined time frames. It is at CKD level that the industry will develop, create more employment, skills acquisition, technology transfer/innovation and local component development.

Locally produced vehicles

Some levers of the policy I spoke about earlier are aimed towards demand side improvement for new vehicles. These include the affordable vehicle acquisition financing scheme, levy imposition for imported new and used cars, control of smuggling and government patronage. These measures are aimed at deepening the new car market, boosting demand and increasing local capacity of auto plants. However, while some elements of the policy have been implemented, some of the demand side levers have not yet been raised.

Our focus on lower vehicle prices is what is driving our plan to launch the CKD for Peugeot 301. Once we are at CKD level, we will commence the local component development and start a parts deletion programme to enable us lower the cost of those components and pass such cost benefits to consumers through lower vehicles prices.

Tokunbo vehicles

Imported used cars are a problem to the local industry. These cars come in without payment of proper duties or are smuggled into the country. This enables the importers to price the vehicles lower against new locally produced vehicles. The industry supported government’s directive to ban import through land borders as over 90 per cent of such imports is smuggled into Nigeria through neighbouring countries without payment of appropriate duties.

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