Business
Tokunbo car dealers count losses over soaring prices
By AYOOLA OLAOLUWA
Car dealers in the country have continued to count their loses, as the negative effects of high terminal charges, import duty, foreign exchange crisis and low purchasing power of Nigerians bite harder.
The Nigerian Customs Service (NCS), it would be recalled, had in April 2022, increased the duty payable on imported vehicles to 20% and another 20 per cent levy, amounting to 40 per cent of the total value of the vehicles.
The Central Bank of Nigeria (CBN) also on Wednesday, June 14, 2023, collapsed all FX windows into the investors and exporters (I&E) window.
The new forex policy negatively affected the nation’s currency, which crashed from its average official rate of N430 in early June to N743.07 at the close of trading at the I&E window on Friday, August 4, 2023, according to data from FMDQ Securities Exchange.
In June 2023, ports and terminal managers also announced a 36 per cent increase in tariff on imported vehicles with effect from July 1, blaming the decision on surging inflation and currency devaluation.
Also reacting to the new FX rates regime, the Customs Service increased the exchange rate for cargo clearing at the port from N422.30/$1 to N589.45/$1.
Added to other costs, such as Value Added Tax (VAT), surcharge, ECOWAS Tax Liberalization Scheme (ETL), shipping charges and clearing charges, total duties payable on imported vehicles hover around 50 per cent.
BH checks revealed that under the new price regime, the actual duty on Toyota Camry is N705,000, while the total duty and clearance cost is N1.7m.
Likewise, the duty for Toyota Corolla is N558,000 and the total clearance cost is N1.3m; duty on Sienna is now N930,000, while full clearance cost totaled N2.2million.
Similarly, duty paid on Toyota Highlander is N1.1million, while total clearance cost is N2.6million. Duty paid on Venza is N1.2million and total cost is N3 million.
“For Toyota RAV 4, the duty payable is N831,000 and total cost of clearing N1.2million; Lexus RX350, duty payable is N1.5million, and total clearance cost N3m; it takes N1.3million to clear Lexus ES350 (total clearing cost N3million), while the duty payable on Honda Accord is N769,000 (total clearance cost N1.8m). All the vehicles mentioned were manufactured between 2001 and 2014.
Some dealers informed our correspondent that big cars like 2020 Highlander, which used to clear for N4.2 million is now cleared for about N6 million.
Available data shows that the sale of fairly-used or second-hand imported cars into the country declined by around 70 per cent in 2022.
According to the National Bureau of Statistics (NBS), the value of used vehicles imported into Nigeria decreased by 47 percent in 2022 to N325.05 billion from N617.48 billion in 2021.
The NBS noted that used cars with diesel or semi-diesel engines cost N72.32 billion to import in the first quarter of 2022, N96.76 billion in the second, N90.77 billion in the third quarter and N65.19 billion in the fourth quarter of last year, totalling N325.05 billion.
Meanwhile, vehicle dealers imported N174.22 billion worth of used vehicles in Q1 2021; N172.07 billion in Q2, 2021; N185.41 billion in Q3 2021 and N85.77 billion in Q4 2021, amounting to N617.48 billion.
Experts in the auto industry all agreed that 2023 figures will be worse.
During a visit to some car marts at Ikeja, Abule-Egba, Oregun and Fagba, our correspondent observed bleak atmosphere as idle sales agents roam about aimlessly, while their bosses sat in the office with virtually nothing to do.
A car dealer at Fagba, Lagos, Tunde Babalola, while speaking to our correspondent, lamented that sales have dropped by about 75 per cent.
“I recently closed down two out of my three car marts in Oregun, Ikeja and Fagba due to low sales, leaving open only the Fagba branch.
“I was just accumulating debts and not making enough sales to cost to keep the shops opened.
“Before now, I used to sell about two to three vehicles weekly. But now, I am a bit lucky if I sell one.
“So, I had no option than to close down two out of the 3 auto shops that I own to be able to stay in business. I pray that things improve soon”, the car dealer prayed.
Meanwhile, while dealers in imported fairly-used vehicles are busy lamenting the negative tide, owners and sellers of Nigerian used vehicles are reaping from it.
BH gathered the high cost of imported vehicles had spurred the spike in the sale of Nigerian used vehicles with intending car owners now looking inwardly.
A car agent at Adetola Bus Stop in Ijaiye-Ojokoro, Musibau Ajani, confirmed to our correspondent that the business of selling tokunbo vehicles is no more lucrative.
“See this Toyota Corolla 2014, it was cleared from Apapa Ports since April and brought straight to my place to help sell it.
“Unfortunately, buyers are reluctant to pay the N4.9 million price tag placed on it by the owner.
“Meanwhile, I have sold three Nigerian used cars within the spate of one week. And the reasons are not far fetched. It is pricing.
“While you can get a good used Nigerian car from N700,000 to N2.5, depending on the brand and condition of the vehicle, the least your can get the cheapest imported fairly used vehicle goes for around N2 million naira as the least you can clear a vehicle is now about N1 million.
“And from my own observation, most of the Nigerian used vehicles are snapped up by those, who need them for commercial transportation”, the agent disclosed.
Speaking on the development, the Deputy Managing Director of CFAO Motors, Kunle Jaiyesimi, also said the said high tariff and falling naira would hurt new vehicle acquisition and fleet decisions of companies.
According to the CFAO Motors boss, Form M valuation rate has already increased by 75 per cent coupled with the ripple effects of petrol subsidy removal and the proposed electricity rate hike.
“This is not the best time for commuters and transporters”, he said.
Also speaking, a professor of Transport and Logistics at the Lagos State University (LASU), Samuel Odewumi, said the removal of subsidy and increase in Customs duty rate is not helpful for the transport sector and the economy.
He maintained that if there are no good vehicles, the transport sector would be affected, while noting that transportation is the live stream through which every aspect of socioeconomic activities flows.
“We find out that those, who are into the transport business are those, who lost their jobs, such as industrial workers that have their private cars and then use it for commercial purposes to feed their families.
“Some weeks back, e-hailing operators went on strike because they have being squeezed to the limit.
“With the money left for them after paying for fuel, operations, taxes from the government and the repairs of their vehicles, they could not break even” declared the university don, who doubles as the Chairman of the Road Sector Committee of the Chartered Institute of Transport Administration of Nigeria (CIOTA)
