If you've tried buying a made-in-Nigeria car or you've done a bit of research about car prices when you planned on buying a new car, you probably would have noticed the vast disparity that exists between Nigerian-made cars and similar foreign-built car models. Sometimes these price differences run into several millions of Naira that would have been utilized in managing other economic needs.
When you consider the superior quality, aesthetics and mechanical reliability of foreign builts cars in comparison to her Nigeria built counterparts, you get to appreciate why millions of Nigerians ask why Nigerian made cars are more expensive.
We will try to analyze why Nigerian made cars are more expensive than similar foreign-built car models and we will also give a few recommendations on how to manage these issues.
Hyundai Assembly Plant
Why Nigerian made cars are more expensive than foreign-built cars?
Before we dive into the analysis, let's consider a typical example that highlights the price disparity issue we are trying to analyze. Take Innoson built IVM G80 5 seater SUV for instance, figures released by Innoson Motors show that the 2020 models of this SUV go for about ₦33 Million. Below are the highlights of this SUV
(5 Seater SUV)
The IVM G80 features the following
- 3.0-Litre Turbocharged Engine
- 5-Speed Auto Transmission
- Power Windows and Power Steering
- Automated Rearview Mirror
- LED lights
- Reverse Alarm Switch and Reverse Camera
- Leather Seats
- Multimedia System and Airbags
Now let's compare a foreign-built SUV that should be classed in the same category as the IVM G80, the 2020 Toyota Highlander. The highest trim of the 2020 Toyota Highlander comes with a 3.5-Litre V6 Engine and an 8-Speed Automatic Transmission, compared to IVM G80 that comes with a meagre 3.0-litre engine and a 5-speed Automatic Transmission.
Interestingly, this highest trim of the 2020 Toyota Highlander has a manufacturer stated retail price of ₦18.61 Million compared to the IVM G80 that cost a good ₦14.39 Million more but still offers way less in terms of quality and features.
From the comparison above, you may be forgiven to say that there is no justification for such price disparity considering the marked quality difference. However, you may want to look at the analysis of the following factors to better understand the pricing regime of Nigerian automakers.
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The Electric Power Factor
A close look at every automobile production plant shows that about 60% of the operations done within these facilities are automated and will thus require electricity to operate. Interestingly, electricity access in Nigeria is less than 60% and is way too epileptic to offer any form of tangible support for these high energy demanding facilities.
Ford Assembly production facility in Nigeria
Thus, to operate effectively and efficiently, these facilities have to find ways to generate their own electricity at a considerable cost. This situation is in contrast to what is obtainable in developed countries that rely heavily on the national grid for power needs. Take China, for instance, a 2018 World Bank report shows that the country enjoys about 100% constant electricity access. Thus, the extra cost of generating power is cut out.
Therefore, Nigerian automakers have to factor in the extra cost of catering for the power needs of their production facilities in the final price of the vehicles manufactured. The truth is, running a power generation plant that is sufficient enough to cover the electricity needs of a vehicle production facility is a very expensive venture. So, you would be more inclined to understand why these cars seem to cost more.
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Inadequate or non-existent technology support
Nigeria is way behind when it comes to providing the required technical support the auto industry needs to operate at the lowest possible cost. In China and other developed nations, the auto industry relies on other industries to supply them with their technical and technological needs. Firms that manufacture car body paints, high integrity vehicle frames, windscreens, electronic components, and the list goes on are readily available there but this is not the case in Nigeria.
The implication of this is that these Nigerian auto companies have to import these parts from foreign countries at extremely high costs. Innoson, for example, imports the transmission and engine used in their cars from Japan, China, and even Germany.
CNHTC truck assembly plant in Kano
To transact these cross-border trades requires the use of the dollar which is the internationally accepted currency of trade. Unfortunately, the exchange rate of the Naira to the dollar is making sure these transactions are just too costly. At the moment, the exchange rate of the Naira to the dollar stands at about ₦400/$1 official rate while the black market goes as high as ₦450 - ₦500. To compound the issue, the banks do not always have sufficient dollars to meet the needs of the public, so most companies rely on the black market at extra cost.
With this in mind, the prices of the fully assembled cars will be a direct reflection of the total cost of producing them. So the next time you see an Innoson car cost more than that from foreign brands, you will better understand why this is so.
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After going through the analytical journey with us, you are better enlightened on why Nigerian made cars are more expensive than their foreign-built counterparts. Even cars assembled by big auto multinationals (Nissan which assembles the Nissan Almera, Peugeot which assembles the Peugeot 301, Kia which assembles Kia Optima, and Kia Rio, finally Hyundai which assembles the Grand i10) cost relatively more when compared to those assembled abroad.
Thus, it is a lot more expensive and difficult to build and assemble cars in Nigeria? So, if these firms must survive and grow, then we must begin to patronize them. On the other hand, our hope is that Innoson Vehicles and other brands will endeavour to deliver products that match the international quality and are worth the money so, that we won't have to feel cheated every time we try to be patriotic.