Nigeria’s auto industry faces complete collapse this year as it loses its only operational car plant, Peugeot Automotive Nigeria (PAN), according to market researchers at Business Monitor International (BMI).
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In its quarterly report reviewing prospects for the country’s auto industry and market, BMI notes that PAN announced in March that operations would close.
Industry representatives have called for government intervention in the form of public sector purchases of cars produced by the plant, but BMI does not believe the long-struggling manufacturer is viable over the medium term, nor is it an attractive proposition for foreign investors.
Several initiatives have been launched to save the automotive industry, including privatisation, state backed car loans and capital injections, and none have succeeded, it says.
BMI highlights the poor state of the country’s infrastructure – and in particular an unreliable electricity supply – as major factors in the demise of vehicle assembly operations in Nigeria.
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By GlobalDataThe lack of a domestic market, competition with cheap used car imports, and the inability to compete on export markets also put a glass ceiling on sales of domestically manufactured cars, BMI says.
The firm also says that it does not expect Nigeria’s other mothballed plants to be revived over the medium-term. However, BMI notes that there is a possibility that the government will throw a lifeline to PAN.
The BMI report also says that Nigeria’s political and economic problems are hampering car market growth this year.
However, BMI forecasts that the consumer class is set to grow in the medium term.
The Nigerian car market is notoriously volatile, it says, and is heavily influenced by government-backed purchases. In the medium term, public sector spending on car fleets and public transportation is likely to be a key determinant of the automotive sector, according to BMI.
Official market data shows that Toyota leads the vehicle market in Nigeria.
See also: Nigeria Autos Report Q2 2009
