Business in Nigeria - Selling Cars

While the global economic melt down has forced car sales to decline globally, the Nigerian auto sales has retained its lucrative status, still selling large units at attractive sales margins.

Learn how to import cars into Nigeria.

This is due to the large market and relatively affordable options as most cars used in Nigeria are out dated by at least 3 years. But that is only for one side of the automobile business; car distributorship.

The other side; Car Assembly isn’t doing too well.While on one hand the Automobile industry in Nigeria is moribund because it currently has only one serious car assembling company which is Peugout Automobile Nigeria Ltd (PAN), on the other hand is doing extremely well with Major car dealers found in the most exotic parts of the country.

Car Assembly versus Manufacturing

There are no indigenous car companies, but in the past, two car assembly companies competed keenly for the Nigerian market; Volkswagen Nigeria Ltd and Peugout Automobile Nigeria Ltd (PAN).

PAN is the only viable car assembly company but even at that produces less than 5,000 cars per annum. The previously existing major competitor, Volkswagen Nigeria Ltd has since ceased operations.

Car manufacturing in Nigeria has failed a couple of times. The primary reason for this is the lack of adequate technology to manufacture locally made vehicles and the near absence of encouraging indicators that will promote transfer of the much needed technology for local use.

This has been attributed to the very harsh operating environment with the state of infrastructure very deplorable especially electricity supply and high cost of production due mainly to importation of needed raw materials from overseas countries and the failure of the Nigerian steel making company; Ajaokuta Rolling Mills to take off successfully. Car manufacturing and assembly have been too risky a business for investors to pursue in Nigeria.

Car Distributorship

However car distributorship business has been doing very well. Virtually all major car brands are effectively represented in the Nigerian market.

For instance, sole distributorship arrangements exist with major car makers and their Nigerian partners. The BMW brand of cars is solely distributed in Nigeria by Coscharis Motors Located in Victoria Island.

Honda cars are distributed by Stallion Motors. Mitsubishi is distributed by CFAO Motors, while KIA is distributed by KIA Motors. If you decide to start a car dealership business in Nigeria, then these are the major players for the leading car brands on Nigerian Roads.

Nature of business

When dealing with brand new cars, it is best run as a retailing unit, choosing prime locations mainly busy roads as show rooms for different cars. After placing orders for the desired quantity from any of the distributors, the cars are then driven to the show rooms where they are put up for sale.

However with second hand cars, the normal procedure for most car dealers is to proceed to Cotonou or Lome to order for cheap second hand cars which are then imported and sold off at much higher prices.

The location can be anywhere including residential areas and commercial areas. The ideal thing is to place a sign advertising the car sale with a telephone number as contact detail. With as little as $1,500 one could engage in this kind of business.

However some other dealers, especially wholesale dealers import first grade used cars directly from Europe, America or Asia and sell them off to smaller dealers.

Learn how to import cars into Nigeria.

Return on Investment

Some car dealers are known to make up to 300% return on their initial investment annually. Although the profitability is relative, however car sales is lucrative business in Nigeria.

Demand

The demand for fairly used cars in Nigeria is mainly for Toyota and Honda cars due to their durability, availability and low maintenance cost.

How to buy high quality used cars to sell in Nigeria.

Selling any of these car brands is less herculean also because they are relatively easier to drive and easier to sell off whenever their owners wish to dispose of them.

However for new cars, most people prefer Toyota, Peugeout, Honda or BMW mainly as a status symbol or for perceived quality. Salon cars and Jeeps are in higher demand.

Market

The main buyers of new cars are corporate bodies especially Banks, insurance companies, Manufacturing and transportation companies, whereas private individuals mainly in the formal sector buy fairly used cars.

Conclusion

Government establishments are in the habit of replacing new cars every one or two years, while corporate bodies especially banks and insurance companies buy new cars every year or twice every three years.

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