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Second Coming of Peugeot Automobile Nigeria: Smooth, Speed, specific.

By Anietie Udobit

 

In August 2015, the Buhari-led Federal Government through the National Automotive Design and Development Council awarded licenses for the establishment of 12 new vehicle assembly plants in Nigeria.

The spokesman for NADDC, Bello Rasheed, said the benefitting companies are automobile manufacturing giants such as Toyota, Honda, General Appliances West Africa, Perfection Motors Company, and Richbon Nigeria.

Others are R.T. Briscoe Nigeria, Nigeria-China Manufacturing Company, Nigeria Sino Trucks, Coscharis Motors, DAG Motorcycle Industry Nigeria, Globe Motors Nigeria, Century Auto-Assembly Nigeria, and Concept Auto Centre.

The plants were expected to produce a wide range of automobile products such as sport utility vehicles, passenger cars, pickup vans, buses, tricycles and motorcycles, among others.

With the commencement of operations by the new licenses, it will bring the current total number of automobile assembling plants in the country to 45.

The Nigerian federal government also banned the importation of vehicles through the nation’s land borders. The prohibition that was announced in early December 2016 to come into effect on January 1st 2017 is an attempt by the authorities to curb large-scale smuggling of cars into Africa’s largest economy to encourage local automobile assembly companies as well as protect government customs revenue.

Though laudable, it comes with a number of downsides, not least having the opposite effect on smuggling than intended.

Automobile assemblers in Nigeria have unsurprisingly welcomed the move to in effect restrict vehicle importation solely to the country’s seaports. Large-scale smuggling of used cars into Nigeria is probably the biggest obstacle to the growth of a sizeable market for new, locally assembled vehicles in the country, required for the motor industry to grow.

PAN Limited is the leading manufacturer of automobiles in Nigeria, assembling Peugeot vehicles at its head office located in Kaduna, and has liaison offices in Lagos and Abuja with a vision to expand its operations to other countries in Africa.

Incorporated in 1972 as a joint venture between the Federal Government and Automobile Peugeot of France, with an authorized share capital of N3 million; it commenced full operations on March 2, 1975, while the erstwhile Head of State, General Yakubu Gowon, commissioned the assembling plant on March 14, 1975. The factory has an installed capacity to produce 90,000 cars per annum in three shifts with ample space for future expansion and can generate direct employment for over 5000 people.

The factory attained peak production in 1981 producing 160 cars per day in two shifts.

After about two decades of smooth operations, during which the Peugeot brand was a favourite buy by consumers and was highly patronised especially by government agencies, the company ran into stormy waters due to what stakeholders called government’s policy somersaults and inadequate tariff protection for local assembling plants. Federal and state governments began to shun PAN’s Peugeot products and began opting for imported alternatives.

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By the turn of the decade, the company’s fortune had begun to slide. PAN’s revenue generation profile had dropped to a meagre N2 billion per annum from about N30 billion a decade ago. Its market share dropped drastically from 20% to only 2%, with car sales figure declining from N31.7bn in 2007 to N1.96bn in 2013. From selling up to 11,768 vehicles in 2007, to only about 1000 vehicle sales, the staff strength slides, from about direct 4000 workers to less than 300, as its financial health worsened over those years and job security became increasingly uncertain.

With its strategic management getting poorer, its dealers, service centres and about 70 local auto component manufacturers severed their relationship with it and shifted their support to other brands. Only a few dealers remained loyal. It wasn’t from government agencies alone that PAN suffered from patronage; even private car consumers shifted their brand loyalty to competitive brands like Toyota and Honda.

Worse, PAN’s nomenclatural parent company, Automobile Peugeot France also, in 2010, suspended the relationship and agreement the two shared. The consequence was that PAN Nigeria stopped getting supply of parts and the benefit of staff training from Peugeot France.

With a crippling debt overhang of N30 billion by 2011 and no prospect of a private investor willing to risk his money in turning it around, Peugeot Automobile Nigeria seemed headed for the junkyard. Then came in 2012, the Asset Management Company of Nigeria (AMCON, which acquired PAN’s debts and converted a portion of it to equity. In what looks like privatisation in reverse, AMCON acquired a controlling 80% shareholding in PAN Limited, and assumed board and management control. It constituted a new board, led by Muhammed Munir Ja’afaru and in 2013, appointed a management team led by Alhaji Ibrahim Boyi as the CEO. In the investment mix is also the Bank of Industry, which owns 1.7% share.

AMCON’s controlling ownership is of course not expected to be permanent. The major mandate it has given the new management is to turn around the ailing company and make it attractive to investors. The managers are charged with among other goals, regaining PAN’s lost market share, restoring the commercial and technical agreement with Automobile Peugeot France and revamping the dealership network.

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Boyi and his team have since set their nose to the production grindstone on that mandate, with a target of 3000 cars per annum. Once again, the PAN plant is churning out vehicles, and this time, Boyi is optimistic, production will be seamlessly permanent.

The CEO’s optimism is buoyed by certain factors that favour the company. One, its financial complexion is looking a lot healthier now after AMCON cleared N12 billion of its debts and the management has been able to rearrange the rest in long-term servicing. The arrangement frees the management from any immediate debt strangulation and creditor-stress.

Again, the management successfully obtained a refinancing facility of N2 billion it deployed as working capital. The company is servicing the facility already. The management has also been able to win back the favour of Automobile Peugeot France, with which it has renewed its partnership agreement. The French company took up some of the cost of reviving PAN’s plant in Kaduna.

Boyi said that PAN is keying into the federal government’s new automotive policy, which he described as holistic and very encouraging for local vehicle production. Very soon, he promised, Peugeot Nigeria will, once again, outrun its competitors, as was the situation in the 1970s and 1980s. He said the brand retains all the excellent features for which it was renowned; including a good maintenance culture that ensures a minimum of 10,000 kilometres or seven months usage before the first servicing for whatever model of Peugeot, three years warranty after purchase.

The company has re-opened maintenance centres across the country and rebuilt its dealership network; all of which it is equipping with genuine spares and training to enable them handle current Peugeot technology.

The Boyi’s team turnaround assignment is made easier by the fact that Peugeot Automobile Nigeria’s residual qualities were unaffected by the downturn it experienced. Of all the assembly plants in Nigeria, all of which suffered serious distress, only PAN’s plant has remained functional. The good news has made revival easier and less cost-consuming. “It remains the best and most comprehensive assembly plant in the African West coast,” the PAN boss enthused.

As PAN bounces back, Boyi wants the federal government to sustain its vital automotive policy to warrant competitiveness for local assembly and local content addition, police the borders more effectively to control smuggling of new and used vehicles, and improve efficiency of local infrastructure and logistics.

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President Buhari on Thursday November 19 inspects one of the ‘Made-In-Nigeria’ Peugeot cars at the presidential villa, the visit of the Executive Vice President, Middle East and Africa, Peugeot Citreon, Mr. Jean-Christophe Quemard.

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Mr. Quemard assured President Buhari that Peugeot was ready to reinvest in vehicle assembly in Nigeria, provided that the right indigenous partners are found.

The Peugeot Chief Executive for Africa and the Middle-East briefed the President on the company’s three-phased plan to resume vehicle assembly in Nigeria with 4,000 cars next year, rising up to 10,000 cars by 2021. He said that the plan, which he urged the Federal Government to support with appropriate policies and actions, will entail higher local content in the assembly of Peugeot cars in Nigeria and the exportation of locally assembled Peugeot cars from Nigeria to neighbouring African countries.

Peugeot Automobiles Nigeria Limited which was privatised some years ago has technically reverted to government ownership with up to 85 percent of its shares now held by the Federal Government and the Assets Management Corporation of Nigeria (AMCON).

Today, the plant has a capacity to produce 250 vehicles a day, assembling two models Peugeot 301 (with four variants) and 508 (two variants). They make significant contributions to the industrial sector by the company’s heavy reliance on a large pool of local content in both material and human respects for the production of vehicles – all built and maintained to the highest international standards in automobile manufacturing.

PAN has a network of nine (9) accredited dealerships and after sales points that sell and provide modern vehicle services across some states of Nigeria. It is also on the verge of establishing three (3) modern Peugeot Service Points broadening its reach and accessibility to Peugeot users.

In addition to this, PAN Limited has a fully licensed Learning Centre. In 2000, the centre commenced a training program to empower youths to become entrepreneurs and skilled professionals in the industry. Over 600 people have benefited from its programs; some of these programs have been done in collaboration with NECA and ITF.

Furthermore, it has embarked on a corporate social responsibility program called the Shade Tree Initiative (STI) and is in collaboration with other interested agencies such as State Governments, which share common aspirations of reducing poverty incidence and creating wealth among the teeming unemployed and under employed youths in Nigeria.

 

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