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Friday, 15 November 2013

Elizade, Globe, Coscharis, Others Trade Tackles with Stallion over Car Imports

•Vaswani challenges them to competition
•Group petitions FG over insider information on automotive policy
•Dealers seek two-year deferment on implementation
By Crusoe Osagie

Major importers of cars into the country are at one another’s throats over allegations made by a group comprising Elizade, Toyota Nigeria Limited, Globe Motors, Coscharis, SCOA and CFAO that one of their competitors, Stallion Group of Companies, was privy to insider information on the new automotive policy, thereby giving it unfair advantage over them.
In a petition written by the group to President Goodluck Jonathan, the auto dealers have warned that the federal government stands to lose about N134 billion in revenue due to a leak of the new automotive policy before it was announced.
But the Chairman/CEO of Stallion Group, Mr. Sunil Vaswani, has dismissed the allegation and challenged them to proper competition if they have the capacity to do so.
The Automotive Policy, which the Federal Executive Council (FEC) approved on October 2, was formulated to encourage local manufacture of vehicles and the gradual phase-out of the importation of used and new vehicles to save Nigeria about N1 trillion spent annually on the importation of vehicles.
Under the policy, the federal government hopes to fast track the industrialisation of the country, reduce foreign exchange demand by importers of vehicles, and create thousands of jobs in the country.
The federal government had made public the new automotive policy on October 2, 2013 and set October 3, 2013 as the deadline for the establishment of Form Ms to import under the current tariff regime until February 28, 2014.
As at October 2, the duty on fully built units (FBUs) passenger cars was between 20 and 35 per cent, while a 10 per cent flat rate was imposed on commercial vehicles.
In order to encourage local manufacture of cars, the automotive policy jacked up the duty on passenger vehicles to 70 per cent and 30 per cent for commercial vehicles.
This means that all letters of credit (L/Cs) opened after October 3 would attract the new duty, while all L/Cs opened before October 3 would attract the old duty until February 28, 2014.
However, the group under the auspices of Auto Manufacturers' Representatives Group in Nigeria is alleging that Stallion Group, which imports Honda, Nissan, Hyundai, Volkswagen and Audi brands of vehicles into the country, among others, had a pre-knowledge of the details of the automotive policy and used it to its advantage.
In a petition dated November 6 by the group to the president, it alleged that as the deliberation on the automotive policy was on-going at FEC on October 2, the Stallion Group, headed by Vaswani, rushed to open letters of credit to the tune of $382 million to cover three years of imports for 20,000 cars.
The petition was signed, among others, by Chairman, Elizade Motors, Chief Michael Ade Ojo; Managing Director, Toyota Nigeria Limited, Mr. Chandrasheker Krishnadas Thampy; Chairman/Chief Executive Officer, Globe Motors, Chief William Anumudu; Chairman, Coscharis Nigeria Limited, Mr. Cosmas Maduka; and Chairman, CFAO Motors, Chief Molade Okoya-Thomas.
The letters of credit, THISDAY learnt, were opened with five banks on October 2 to beat the new tariff regime contained in the automotive policy.
This means that the federal government could lose about N134 billion because of the information leaked to the Stallion Group.
Sources said normally, Stallion Group opens letters of credit of about $100 million annually, but by shipping its imports on cars to beat the new tariff regime, the group has effectively distorted the market and created unfair competition.
The suspicion is that someone either in FEC or the Automotive Council of Nigeria leaked the information to Stallion Group.
THISDAY further learnt that Stallion Group was aware of the day FEC was going to meet and consider the memo on the automotive policy because it helped in drafting the new regulation.
The manufacturers’ representatives in the petition in which they are seeking audience with the president to iron out the grey areas, said: “It is obvious from this that the proposed automotive policy has been compromised and has resulted in providing undue advantage to one single group whose track record as a business entity has been monumentally notorious and whose owners have been deported twice in the last 10 years for economic sabotage.
“The federal government will be committing a grave error if such a group is given monopoly over the automotive industry in Nigeria.”
They also urged the federal government to probe the Stallion Group for allegedly evading the proposed duty increase by opening letters of credit and ordering vehicles thrice above its annual average import.
They also implored the federal government to set aside “what is apparently an unfair action taken and request that a fair and level playing field be provided to all members of the industry.”
They also said there was no representation from the Global manufacturers' representatives in the committee that drafted the automotive policy and therefore called for the constitution of a body comprising representatives of the federal government and stakeholders to review the policy and report back within six months.
Besides, they sought a two-year deferment of the implementation of the automotive policy to allow some serious investors complete their ongoing feasibility studies and plans to establish motor assembly plants in the country.
But reacting to their petition, Vaswani, who spoke to THISDAY from the United Kingdom yesterday, said the petition was baseless in its entirety.
He said it was not true that he had fore knowledge of the automotive policy as all car dealers – importers and manufacturers alike – were carried along by the Minister of Trade and Investment, Olusegun Aganga for more than a year when the policy was being formulated.
“They were all in the know and made their input. Chief Ojo of Elizade, in particular, was one of the biggest advocates of the policy and all of them were aware of the duty increase before the policy was taken to the Federal Executive Council for approval.
“Besides they were wrong when they said that the duty regime came into effect on October 3. It would only come into effect when the circular on the new duties for commercial and passenger cars are released by the Ministry of Finance,” he said.
Vaswani said as long as the circular had not been released, his competitors were free to take advantage of the window till February 28, 2014 to beat the deadline.
He also denied that he had established Form Ms to import 20,000 cars, stating, “The quantity Stallion Group is bringing is much lower than that, and that includes the value of the L/Cs which we opened.”
He said it would be physically impossible for Stallion to bring in 20,000 units between October and February.
“Between Toyota and Elizade, which bring in the most cars into the country, they only import 17,000 units per annum, so how can Stallion bring 20,000 units in a space of five months.
“This just smacks of sour grapes on the part of those people who have written the petition because the grace period is still there for others to import before the circular is released.
“If they have failed to do so, it simply means they lack the capacity to import,” he said.
On the automotive policy, Vaswani said as a Nigerian citizen (he holds a Nigerian passport), he is very passionate about the policy, as it would create thousands of jobs.
He said Nigeria imports some 500,000 units of used cars annually and 60,000 units of news cars, but with the new policy, manufacturers could make cheaper cars that are accessible to more people in the country.
“The automotive industry is one of the best things that has happened to this country. Less than a week after it was announced, the Chairman/President/CEO of Nissan, Carlos Ghosen, announced that Nissan was entering into a joint venture with Stallion Group to assemble cars in Nigeria.
“The likes of Innoson Group is also very happy with the policy, and so is Peugeot Automobile Nigeria Limited (PAN),” he said.
Also, as a manufacturer of cars from Stallion Group’s Volkswagen of Nigeria (VON) assembly plant in Lagos, he said his company would rather produce cars that attract no duty than import.
“If we can manufacture at zero duty why would I want to import three years stock? It does not make sense because I will have to pay interest to the banks for the entire period and hold on to stock that is aging because model specifications of cars change so often.
“Our intention is to reduce our stock of imported cars from next year and churn out more cars from our plant.
“At VON, we have an installed and expansion capacity to assemble 45,000 units of complete-knock-downs (CKDs) units and semi-knock-down units.
“With NISSAN, we shall be rolling out Nissan Patrol SUVs by April next year, and move on to other passenger vehicles and buses, so efforts of manufacturers should be encouraged not run down by competitors who are resistant to the new policy,” he said.
When contacted, Aganga also dismissed the allegations by the group that it had not been carried along when the automotive policy was being formulated.
He said all the auto dealers were in the know and even went with the ministry to South Africa for a retreat on the policy.
According to Aganga, “The new policy is an adaptation of the South African Automotive Policy. Since South Africa started manufacturing cars, the industry today contributes 7 per cent to the country’s GDP, it accounts for 12 per cent of exports, and is the second largest employer of labour there.
“Also, Chief Ade Ojo was one of the first persons who approached me to adopt the South African model. It was for this reason I studied what my counterpart in South Africa had done to the extent that their minister became our consultant.
“As a result, when the policy was eventually approved on October 2, Chief Ojo was in my office on October 4 to intimate me of the plans he has with Toyota to set up an assembly plant.
“This is what I expect the policy will do: encourage investment and catapult us to industrialisation, not accusation being hurled by importers who want the status quo to remain.”
He said he was not surprised that some car importers were resisting the automotive policy and have asked for a deferment, but vowed that he would block it with every ounce of his being.


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