West Africa: Ripe for Opportunity in Cross-Border Automotive Trading

West Africa: Ripe for Opportunity in Cross-Border Automotive Trading

If you are a car dealer or fleet owner, you cannot ignore the opportunities offered by cross-border, pre-owned vehicle trading.

The pandemic taught us that we live in an interconnected world and cannot ignore what happens in other countries. We saw that with the shortage of Asian-made semi-conductor chips and, most recently, Russia’s invasion of Ukraine, which is causing disruptions to raw materials such as neon, palladium and nickel, putting further pressure on an already-weakened supply chain. To quote Newton’s Third Law: “For every action, there is an equal and opposite reaction.”

Interconnectedness presents a significant business opportunity and the industry should lean into greater diversity, not only for new-vehicle supply chains, but also for pre-owned vehicle trading.

According to data from IHS Markit, in the United States last year, the average age of an automobile was 12.1 years. While that is the first time the average lifespan of a vehicle has surpassed 12 years, it is still far below the average age of a vehicle on the road in Nigeria, which now stands at 16 years.     

What do those statistics mean for global automotive trade? It means that cars that are considered old and obsolete in North America and Europe still have significant value in a West African market like Nigeria.

If you are a car dealer or fleet owner, you cannot ignore the opportunities offered by cross-border, pre-owned vehicle trading. Consider this: Nigeria is the largest economy in Africa and the 27th largest in the world. A middle-income, mixed economy and emerging market, Nigeria has also experienced rapid growth, with expectations that the country will double its population by 2050.

In Nigeria, vehicle demand far outweighs supply. The Nigerian Bureau of Statistics puts annual demand at 720,000 units and local equipment manufacturer (OEM) capacity at only 14,000 units.

Today, Nigeria is almost entirely reliant on imports amid closures of manufacturing plants from carmakers such as Nissan, Peugeot and Volkswagen. As of 2019, the National Automotive Design and Development Council found that Nigeria had only nine active OEMs, seven of which were foreign manufacturers with assembly plants. To encourage a greater influx of vehicles, Nigeria is seeking to reduce import duties from 35% to 5%.

Those statistics, combined with the country’s changing demographics and poor public transportation infrastructure — more than 80% of trips in the country are completed via cars or light trucks — make Nigeria a prime market for dealers in export countries such as the United States and Canada, as well as European markets.  

The opportunities go well beyond Nigeria to the broader West African region. In 2020, the United States exported $720 million in used vehicles to West Africa, third only to Germany and Japan in gross used vehicle exported value.  

Historically, poor transparency and confusion around logistics, vehicle condition, currency conversion, pricing arbitrage and analytics have served as a barrier to entry in international automotive trading. In recent years, dealers who have managed to trade internationally have done so in a largely fragmented way, relying on personal contacts and messaging apps. This ad hoc approach has paved the way for mistrust and fewer buyer/seller protections, which, in turn, has limited trade and not always placed the industry in a positive light.

But technology is evolving to help create a new level of trust and transparency between global buyers and sellers. As B2B automotive trading begins to resemble e-commerce shopping similar to sites like Amazon and eBay with the addition of marketplace platforms, buyers and sellers can finally access new ways to cut through the complexities and experience transactions that are completed according to the region’s import and export terms, conditions and legislation. That means buyers will benefit from transparency and access to better data on potential purchases, and sellers can have peace of mind knowing that they will be paid for their sold inventory.  

There has never been a better time to explore cross-border automotive trading. With improved technology, buyers and sellers will have the whole world at their disposal — and that is critically important, not just for purposes of supply and demand, but for whole economies that have been virtually shut out of access to automobiles.

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