23 May 2010

Nigeria: Who Says We Can't Make Our Own Vehicles?

Lagos — In one of his speeches, the President of Nnewi Chamber of Commerce, Industry, Mines and Agriculture, Mr. Chukwuemeka G. Nzewi, once said that over 95 per cent of industries in Nnewi are built by indigenes. And this is a fact. However, the absence of a developed industrial estate may be the single most important factor why the non-indigenes have not contributed noticeably to the industrialisation of Nnewi he also said.

The Nnewi Chamber had in the past initiated steps for the provision of land for the industrial estate. The estate, according to him would help existing small and medium industries and lead to a planned industrial development. It would also ensure that the indigenously driven industrial revolution in Nigeria for which Nnewi has come to be known is sustained. The 76 hectares of land already earmarked by the government should be developed.

The assembly of motorcycles in Nnewi with local brand names was a good development that positively impacted on further industrialisation of Nnewi. The emergence of such motorcycle assembly industries as Innoson amongst others is definitely in the right industrialisation path. There are many informal manufacturing activities in this area and this gradual approach of conversion from importation to manufacturing and assembly, Nzewi predicted would augur well for the future of industrialisation.

The origin of industrialisation or industrial development the world is witnessing today is traceable to the industrial revolution in the 18th century. Industrial revolution applies to a set of technical, economic and social changes associated with a rapid development of industry.

It was Arnold Toynbee who popularised the phrase "Industrial Revolution" when his book "The Industrial Revolution" appeared in 1884, a year after his death. It was then used to describe basic changes in the British industry during the previous one hundred years.

These changes were in the transformation of the coal, iron and textile industries; the mechanisation of the cotton and wool industries and the use of steam power. Britain is therefore regarded as the first country to undergo full-scale industrialisation. Hitherto the changes were slow. Industrial revolution acquired this meaning because in mid-18th century Britain, these changes took on a new pace and became cumulative. It changed the structure of the economy. The social and economic relations of the people were also affected.

The political environment became bound up with the new economic momentum. Generally, Industrial revolution in itself is the shift, at different times in different countries, from a traditionally agricultural based economy to one based on the mechanised production of manufactured goods in large-scale enterprises.

Once it begins, industrial revolutions rarely stop. There may be a decline in the relative importance of early centres of industrial growth and significant shifts in location. This can also be the story of what is happening in Nnewi, Anambra State, south east of Nigeria; it is gradual, but the industrialisation is steady.

And one of the companies that is hugely involved in the industrialisation of the area and Nigeria in general, is Innoson Group. The company's latest foray is in the area of auto manufacturing through its Innoson Vehicle Manufacturing (IVM) Company Limited. In no distance future, the company will launch its series of IVM vehicles into the Nigerian auto market. The unique thing about the vehicles is that they are wholly Nigerian made. All the parts and other raw materials are sourced locally except the engine blocks that are sourced from Toyota, China.

If the company finally pushes the vehicles into the market, which it hopes will crash the cost of vehicles in the country, it will make history of not only manufacturing world tested vehicles, but further mark the first time vehicles are manufactured locally in this part of the world. Presently, the company is manufacturing a 43-seater bus, 17-seater bus, an SUV (Jeep), pick-up trucks for various purposes, while the IVM saloon cars will soon be added in the production line.

The Chairman and Chief Executive Officer of Innoson Group, Chief Innocent Chukwuma told THISDAY in Nnewi last week that despite the fact that the vehicles are manufactured, the prices are going to be competitive and affordable. He intends to crash the cost of new vehicles in the country as he did few years ago when he crashed the cost of motor bikes when the price of the imported ones were getting astronomical for the common man on the street who needs it. At the end of the day, he said there would be no reason for one to go for second hand vehicles when he can afford new ones from the IVM range.

The journey for the Nigeria made vehicles by Innoson Vehicle Manufacturing Limited did not start yesterday. It is the fruit of a long term planning and huge infrastructural investment. Incorporated in February 2007, with head office and plant located in Akwa-Uru Village in Umudim, Nnewi in Anambra State, Innoson Vehicle Manufacturing Company, was established to produce a wide range of automotive products like cars, commercial buses, making use of substantial local input.

According to Chukwuma, when fully operational, the plant which is built in the collaboration of a consortium of Chinese auto-makers, is expected to produce other vehicles like trucks, pickup vans, tricycles and purpose-built vehicles like Police patrol vans, refuse collectors/compactors as well as sport utility vehicles (SUVs). Samples of the vehicles that rolled out of the plant were displayed at the recent Nnewi International Auto Trade Fair and the vehicles were highly commended by the Federal Government officials.

With an employment target of about 500 Nigerians and a sprinkle of Chinese expatriates, Innoson Vehicles Manufacturing Company Limited is expected to have an installed capacity for 10,000 vehicles per annum and a turnover of N30.4 billion. As the initial units displayed and test-driven in Nnewi last November are pointers to the foray, the IVM-badged vehicles will compare favourably with imported ones in terms of performance and durability, but will have the advantage of affordability owing largely to high level of local content.

The company's chairman said there is no doubt that Innoson is poised to replicate in the auto industry the revolution it set off in the motorcycle market some years back with the products from its Innoson Nigeria motorcycle plant in the same Nnewi.

Those who have followed the growth of IVM believe that the story of Innoson Group began with foresight, hardwork, perseverance and investment acumen of Chukwuma. They also said that it is about an investor who as a young man ventured into trading in tyres, motorcycle parts and accessories of mainly Honda brand, under the business name of Innoson Nigeria Limited in 1981.

With time, the company flourished remarkably and from being well known as leader in the business of motorcycles and accessories, the company launched into the importation of products from China. By 1990s, Innoson Group had become such a force that its products were dominating the market in all parts of the country and the West Africa sub-region with demand some times outstripping supply.

As a visionary investor and businessman, Chukwuma immediately realised that time was now to domesticate the production of motorcycles with substantial local input. Business watchers said the integration had attendant benefits of enhancing Innoson grip on the market and contributing positively to the development of the economy by way of technological transfer, employment opportunities and competitive pricing of motorcycles.

As the parent company, Innoson Technical and Industrial Company Limited later in 2002 veered into other lines of productions. Located in Emene, Enugu, Enugu State, the company engages in the manufacture of top-grade plastic products for household use, industrial applications and export.

Known formerly as Easter Plastics and owned by the old Anambra State government, the company was at the time of the acquisition by Innoson, derelict with obslete machinery. Chukwuma later reequipped the factory with modern machines and tools and transformed it into the biggest plastics company in Nigeria with products widely acclaimed to be among the best in the market. Presently, the company makes more than 60 plastics products with the list expanding every day.

Satisfied by the quality of the company's products, in 2008, the Standard Organisation of Nigeria (SON), at an elaborate event in its factory in Emene, presented the company with a MANCAP quality certificate after rigorous tests on some of its lines of products including the internationally acclaimed Innoson plastic chairs.

Innoson Group is bound to grow further when the General Tyres and Tubes Limited also located in Emene Industrial Layout, Enugu comes on stream in no distant future. When completed, the tyre factory will have the capacity to meet the nations motorcycle and motor tyres and tube needs. The company is being established in partnership with other Nigerian investors and Chinese technical partners. With this and other companies in the pipeline, Innoson has continued to grow into the country's formidable industrial giant with the presence in various vital productive sectors of the economy and affecting the lives of families across the country in various ways.

Why Chukwuma expands his lines of business, he is asking government to grant the companies some incentives like tax reliefs. He said his companies are not getting any such relief from any government quarters.

Interestingly, there are four distinct modes of investment financing in Nnewi and other parts of the country. This excludes the isolated case of partnering with foreign investors already mentioned. The first is where the owner finances the investment 100 per cent with own funds and then with some support from the banks for working capital.

This is the dominant mode with very few not receiving any support from banks. There is always the problem of post founder succession and success. The second is where a few people collect money from others to set up factories that did not work. This second mode is replete with a lot of credibility as well as succession problems. The third mode is by going public by raising money from the Stock Exchange.

Innoson Group, according to its chairman, may explore the stock market option. "But certain things has to be on ground before this move is made, he told THISDAY in his office in Emene, Enugu. Other companies like Cutix Plc and Adswitch Plc have adopted this approach. Chukwuma preferres to go public rather than use private placement for three main reasons. He wanted the shares to be marketable. He believes it would be easier to raise more funds in future.

The fourth mode of financing that is available for companies like Innoson is from the 100 per cent bank financing. This cannot be sustained as funds are diverted into other areas and compounded by the position of major local banks. The indiscipline in the management of such funds created problems that caused the failure and closure of both trading and manufacturing businesses.

According to a recent report, the United Nations Industrial Development Organisation (UNIDO), the World Bank Group (WBG) and the African Project Development Fund (APDF) are jointly mounting a program aimed at developing the Nnewi Automotive Industrial Cluster to a self-sustaining standard. This is a big boost to the industrialisation of Nnewi. Nnewi at present is the source of more than 80 per cent of motor spare parts trade in Nigeria (both for automotive and motorcycle).

There are medium and large-scale industries. There are also micro and small-scale entrepreneurs, and importers of new spare parts. Four main associations coordinate activities in the Nkwo market. These are old and new motor parts dealers associations and old and new motorcycle parts dealers associations.

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