The Federal Government and local automobile manufacturers have disagreed on the enforcement of a 70 per cent tariff on imported used vehicles.
While the latter want the Federal government to commence the enforcement with immediate effect the second phase of the imposed 35 per cent tariff on imported used vehicles to discourage their importation, the government says it will only do so after putting in place a low-cost vehicle purchase scheme.
The government had raised the tariff on all imported cars, both new and old, from 22 per cent to 70 per cent when it introduced a new automotive policy in September 2013 to encourage local production of automobiles. It also abolished import tariff on completely knocked down components of automobiles.
The enforcement was to be executed in two phases of 35 per cent each. While importers of fully built cars are already paying the 70 per cent rate, only the first phase of 35 per cent tariff is being paid by importers of used vehicles.
The automakers, at a forum in Lagos, said the delay in imposing the second phase of 35 per cent tariff on imported used vehicles was adversely affecting their investment in auto assembly plants and the growth of the industry.
They, therefore, called on the government to increase the tariff on used cars in order to encourage the growth of the local auto industry.
Those who spoke at the forum attended by the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, included the President, Coscharis Group, Dr. Cosmas Maduka; the Managing Director, VON Automobile Nigeria Limited and Chairman, Nigerian Automotive Manufacturers Association, Mr. Tokunbo Aromoralan; the Managing Director, CFAO Automotive Equipment and Services Nigeria Limited, Mr. Thomas Pelletier; and the Managing Director, Peugeot Automobile Nigeria, Mr. Ibrahim Boyi.
But the Director-General, National Automotive Industry Development Plan, Mr. Aminu Jalal, said although the policy was meant to accelerate the development of the nation’s auto industry, the government would execute the project without inflicting serious pain on the people it was meant to cater for.
According to him, the 35 per cent levy on used vehicles has been suspended until, “the successful launch of the low-cost vehicle credit purchase scheme and the establishment of safeguard against anticipated smuggling and diversion of goods to neighbouring ports.”
Jalal also said, “Nigerians buy used vehicles largely because they are cheap” but added that most of them (used vehicles) had no integrity and carried a lot of safety and environmental hazards. “Money used by Nigerian to buy used vehicles can be made as down payments for new cars assembled locally,” he added.
While calling for a higher duty on used vehicles, Maduka said, “If government is willing to make this policy work, they should play an important role and increase tariff on importation of used cars.”
“I am happy about the automotive policy but I am not satisfied with the implementation. Ford recently disassembled over 500 units of the vehicles that were meant for Nigerian market because we could not accommodate them. We have built over 2,500 units of pickup trucks that we have not been able to sell; the government is not buying.”
Aromolaran also echoed this view, saying the 70 per cent levy should be imposed on used cars, which would pave the way for affordable new vehicles from local assembly plants.
Similarly, the MD of PAN, Boyi, said, “If you look at the market structure today, new car market is less than 20 per cent of the total market. Almost 80 per cent of the total car market has been taken up by used cars.
“One of the elements of addressing the issue is the tariff structure. We need to increase the tariff for used cars so that they will not be more attractive than new cars.”
The automakers maintained that the local automotive industry had an installed capacity of 500,000 cars annually but could only utilise less than three per cent of that capacity.