FG moves to avert car price hike

The government may have tactically bowed to pressure in its imposition of 70 per cent duty on imported cars as it okays a concessionary duty for some dealers,RASHEED BISIRIYU reports

The Federal Government is considering a new measure to avert a possible increase in the prices of vehicles in 2014 as a backlash of its new automotive policy.

Our correspondent learnt on Sunday that a concessionary import duty for some car dealers had been approved in principle.

As part of measures aimed at encouraging local production and assembling of new vehicles, the Federal Executive Council had last month approved the new national automotive policy, which imposed a higher import tariff on fully-built vehicles.

But auto dealers and concerned economists warned that the imposition of a 70 per cent duty on imported cars would shoot up vehicle prices by about 60 per cent and disrupt the nation’s economic activities.

The Lagos Chamber of Commerce and Industry said in a statement that the sharp increase in the tariff on vehicles would harm the economy and the welfare of the citizens.

The Director-General, National Automotive Council, Mr. Aminu Jalal, told our correspondent in a telephone interview that prominent car importers who could give the government a serious commitment about setting up vehicle assembly plants in the near future would be given a special duty on their imported cars.

This, he said, was to forestall a crisis in the nation’s car business next year, especially with the fears that the sudden high import duty on cars would skyrocket the prices of vehicles.

He, however, did not give the details of the concessionary rate and the beneficiaries.

The NAC DG said there was no going back on the immediate implementation of the policy.

Government had set October 3, 2013 as the deadline for the establishment of Form Ms to import and expected that all previously ordered vehicles would have been delivered by February 28, 2014.

Jalal said, “We intend to give a concessionary import duty to those dealers/importers that can offer a strong commitment that they will go into vehicle assembling very soon. But we’ll not shift the date of the new policy.”

A group comprising Toyota Nigeria Limited, Elizade Nigeria Limited, Globe Motors, Coscharis Motors, SCOA and CFAO had petitioned President Goodluck Jonathan, alleging that one of them, Stallion Group of Companies, was privy to the content of the new policy, ahead of others and had reportedly ordered sufficient vehicles to beat the deadline.

The group, writing under the Auto Manufacturers’ Representatives Group in Nigeria, said the nation could lose N134bn in revenue as a result of this.

The President of the Coscharis Group, Mr. Cosmas Maduka, later led other aggrieved dealers on a protest march to the National Assembly, complaining that the notice for the commencement of the new auto policy was too short.

The details of the new policy provided by the Ministry of Finance stated that a fully-built car would attract a duty of 35 per cent and a levy of another 35 per cent of the cost of the vehicle.

Importers/dealers used to pay 20 per cent and two per cent as duty and levy, respectively on new cars.

Dealers have estimated that the showroom price of an imported car will rise by 60 per cent when other variables are added.

The LCCI has similarly said the new tariff will bring about a higher transportation costs with impact on inflationary conditions in the economy, as it notes that over 85 per cent of the freight in the economy is being moved by road.

It added in a statement that the new import duty would put vehicles “further beyond the reach of the Nigerian middle class, especially in the face of poor credit access and high lending rates.”

The LCCI called for the development of ancillary industries for the production of batteries, glass, radiators, tyres and other vehicle components as well as affordable finance for the investors.

It stated that the industry should be predicated on strong engineering infrastructure, including the production of flat sheets, foundries and fabrication of vehicle components needed in the vehicle production.

It stated, “Development of the sector would not thrive in an environment where the cost of fund is between 25 per cent and 35 per cent per annum. Without the creation of sound infrastructure, especially power supply and transportation, there can be no enduring industrialisation.”

The LCCI recommended a robust consultation with stakeholders in the entire value chain of the automobile sector to develop a sustainable road map for the development of the sector.

It said the framework for the utilisation of the automotive development fund should be reviewed “to ensure proper targeting for the development of domestic capacity for the automobile sector while long term affordable finance should be made available to the automobile industry manufacturers from the automotive development fund.”

But Jalal noted that all relevant groups were well consulted before the policy was announced and added that a committee had been constituted, which comprised the aggrieved dealers, for effective implementation of the policy.