INNOSON, against all odds
By Tobi Adetona
Business correspondent
Nigeria climbed 15 places higher on the World bank’s ease of doing business index in 2020. It is currently ranked 131 out of 190 countries, a slight improvement from its previous position of 146 in 2019. For the average Nigerian entrepreneur, the ranking and supposed improvement highlighted above is not only impractical but also meaningless due to the arduous process most start-ups still have to go through before becoming full-fledged corporations or in most cases wither as a result of the insurmountable odds posed by their environment. In reality, despite the figures touted above, the chances that most innovative start-ups have to survive in Nigeria’s business climate could be likened to that of an Iroko tree stuck in the middle of the Sahara.
In a country where the total public debt estimated at $85.9 billion dollars represented 34.9% of the country’s GDP as reported by the debt management office in the end of June 2020, a colossal amount accrued majorly by the mismanagement of public funds, increased imports and lower revenue from oil, the mainstay of the country’s economy which has accounted for 90% of its exports since 1970. The gross incompetence on the part of the country’s leadership either past or present to successfully diversify its economy has led to this acute dependence on hydrocarbon products which has dwarfed the growth of other sectors like the Agricultural industry, manufacturing, clothing and textile and so on.
Economic diversification as it were is essential to not just an overall increase in a nation’s GDP but also in creating a long-lasting series of economic activity which supports multiple businesses within it. Despite the the fact that the government has failed over the years to explore this economic option, some daring citizens have aspired to create corporations that hope to revive local production in some sectors that have become ineffectual over the years. One of the sectors that readily comes to mind in this regard is the automotive industry.
The advent of the automotive industry in Nigeria can be traced back to the 1950s. While the majority of the production then centered mainly on passenger trucks and commercial cars, one of the earliest companies that led this production was the United Africa Company which assembled mainly Bedford PJ trucks, a very common sight on Nigeria roads at the time. The oil boom that came with the 1970s heralded more development for the automotive industry in Nigeria and this led to joint venture partnerships being signed by the government and major foreign car manufacturers so they could assemble their vehicles locally.
Most of the passenger vehicles brands assembled locally were Peugeut Nigeria Ltd and Volkswagen. The general decline that followed Nigeria’s economy towards the end of the 1980s and the instability in government, coupled with the higher cost that came with manufacturing vehicles locally, ushered in a new wave of importing used foreign cars which has dominated the automotive industry from the early months of the year 2000 till this very moment. The relative affordability and durability of this used foreign vehicles led to a gross reduction in the local production and assemblage of automobiles, a situation that is sadly still prevalent today.
The general downswing in the local automotive industry during the subsequent years that followed the domination asserted by used foreign cars served as the basis for the founding of Innoson vehicle manufacturing (IVM) in 2007 at Nnewi, Anambra state. The company was established by Chief Innocent Chukwuma whose mission according to the company’s history was to completely eradicate used automobiles from Nigeria by boosting the production of vehicles locally.
It is often well-known that Local production is vital to a country’s economy as it not only provides mass employment for her general population but also directly influences high economic growth. When factories are created to produce goods locally, an increase in the demand for those goods from international markets eventually leads to Exportation – a major component of aggregate demand. Since aggregate demand represents the total demand for the total amount of goods produced in an economy, a general uptick in its increase leads to a proportional increase in the country’s GDP.
IVM, Nigeria’s first indigenous automobile producer has seen considerable growth since 2007. According to a statement made by their general manager of sales in an interview with TVC Nigeria, the company has sold over 30,000 vehicles since its inception. While the numbers above are still decent for a 14 – year old company birthed in Nigeria’s unfavorable business climate, IVM has sadly not been able to get most of their vehicles to replace the public’s yearning for used foreign cars.
Despite not eschewing other important reasons like the public’s mistrust in a locally manufactured vehicle and IVM’s poor efforts when it comes to publicity, the big reason for the company’s apparent failure in breaking the hold of imported cars in the automotive industry is mainly due to the price of their base models which doesn’t put the earning power of the average, middle-class Nigerian into consideration. Taking the Innoson FOX for example, a decent car with a seating capacity of five, 45 litres fuel tank and a moderate fuel consumption rate of 7.3 litre per 100km which sells at an average of N3.52 to N3.85 million.
The asking price for this model in particular is relatively steep when compared to that of a used foreign car like the 2010 Toyota Camry which offers nearly the same benefits, sells around the same price range and have rightly earned the trust of the general population over the years.
Even though this price hurdle has slowed down Innoson’s intended country-wide domination, the company has continued to thrive despite not enjoying enough patronage from the general public. This would be majorly due to private contracts gotten from state governors, private oil companies and the Nigerian military which had reportedly acquired more than 70 variants of IVM vehicles in its fight against Boko Haram. In spite of this major successes, it would seem Innoson still has its eyes set on its original goal which is eradicating foreign competitors and proving itself the dominant auto brand in Nigeria.
The latest move that signaled the company’s commitment to this cause was the launch of the IVM Caris in September 2020. The Caris at first look is a sporty and modern sedan that bears an uncanny resemblance with Hyundai’s Elantra. It possesses modern features like improved exhaust technology, Air conditioned leather seats, reinforced shock absorber, excellent smartphone integration, Standard LED front lights, enhanced multimedia experience, Reverse camera, Dual suspension system and an engine capacity of 2.0L.
This modern car sells for N4.5million according to carmart.ng, which admittedly is a fair price for a vehicle of this quality. IVM’s desire to compromise on the price of their vehicles while making sure they retain moderate levels of international standard signals their devotion to making sure their fellow Nigerians get the proper value for what they are paying for. The plush interiors of the Caris and its modern features are a testament to this fact.
Nigeria still continues to plummet economically and the odds are highly stacked against IVM as they carry on with their quest to revive an ailing industry whose export potential as of this moment is a little bit higher than zero. Up to this time, Foreign auto makers still continue to dominate the industry with the aid of big distributors like Elizade. According to data gotten from the National bureau of statistics, the amount spent on the importation of used cars and motorcycles rose from N252.3 billion in 2018 to N301.8 billion in 2019. This total amount represented 7% of the country’s imports which rose to N15.19 trillion in 2019.
It is clear from this analysis that Innoson still has a lot to do. Nevertheless, with the launch of the IVM Caris, Innoson motors has displayed a new penchant for improvement and compromise alongside an inspiring combo of entrepreneurship and patriotism that fires with enthusiasm, a bright hope for the local Automotive Industry and Nigeria as a whole.
