Transport Poses Risk To Nissan's Regional Strategy
The Renault-Nissan Alliance has signalled its intention to be a 'first-mover' in the Nigerian production segment, as Nissan Motor has reached an assembly agreement with local distributor Stallion Group . Following the proposal of a new automotive policy in the country ( see 'Automotive Policy Seeks To Lure First Movers', October 4 ) , Nissan has singled out Nigeria as a potential production hub for its Africa regional strategy. While a production infrastructure is already in place, BMI warns that risks to this strategy lie with the country's transport network.
On the plus side, Nissan has access to existing assembly facilities. Stallion already produces commercial vehicles, but will see the capacity of its plant increased to 45,000 units a year under the deal with Nissan, which will bring a range of cars, light trucks and vans to the plant. The deal also includes the potential to open up the plant to Renault, although its sales volumes are much smaller than Nissan's.
Domestic production will undoubtedly give Nissan a competitive advantage in the Nigerian market, but CEO Carlos Ghosn is also looking to the longer term, saying 'as the first-mover in Nigeria, we are positioned for the long-term growth of this market and across the broader continent.' He also said the company is 'preparing to make Nigeria a significant manufacturing hub in Africa'.
|Ports Struggling To Cope?|
|Nigeria Vehicle Sales (CBUs) And Port of Lagos Throughput Growth (tonnes, % chg y-o-y)|
Producing for domestic demand in Nigeria is logical, given the appetite for Japanese brands and the potential for market growth. BMI expects the passenger car market to grow 36% between 2013 and 2017. However, we do see some potential obstacles to making Nigeria a hub for the rest of the region, most notably the condition of the country's internal transport infrastructure.
While Nigeria's ports are relatively well developed to cope with seabound imports and exports, although the level of throughput growth has not been met with expansion investment, creating potential for bottlenecks. The proximity of Nigeria's major ports (Apapa and Tin Can Island) to the commercial centre of Lagos has been a double-edged sword, both driving growth in throughput but also restricting space for the expansion required to keep pace. BMI's Freight and Shipping team also highlights that the proximity of the ports to the city has also led to congestion further up the supply chain, as a busy port coupled with a well populated city has led to congestion on Lagos' road network ( see 'Nigeria: Assembly Potential Creates New Logistics Demands', July 11).
Nissan has three years to consider these challenges, as it aims to double sales in Africa by 2016, from the 110,000 units sold in the region in 2012. It faces fierce competition, however, not least from compatriot Toyota Motor, which has its own goal of increasing its existing 14% share of African sales. Up to this point, Toyota has mostly focussed its manufacturing investment in East Africa, basing a plant and logistics centre in Kenya (see 'Toyota Looks Beyond Kenya For Growth', June 11).
Nigeria's Ministry of Trade and Investment expects Toyota to be among those taking advantage of the new industry policy, however, having been one of the carmakers included in the consultation process. In Nigeria alone, Toyota holds a 40% share of the market, having posted growth of 30% when the overall market declined 5% in 2012, and will be keen to maintain its competitive advantage.