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Innoson:
Pioneering indigenous auto manufacturing
By Moses Akaigwe (igwemos@sunnewsonline)
Friday, May 23, 2008
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•One
of the production lines already completed. Inset is A
sample of the mini truck to be produced by Innoson
Photo: Sun News Publishing |
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History is being made in Umudim, Nnewi, where a businessman
and industrialist, Chief Innocent Chukwuma, is partnering
with Chinese automakers in building an automotive plant which
is already being described as capable of revolutionalizing
vehicle production in the country.
This is not just because the auto manufacturing plant will
be the first privately owned investment in that sector to
mass-produce purpose-built commercial vehicles with substantial
local content, but because it also promises to roll out products
that will wear price tags that are affordable to the target
market without compromising quality.
The plant, Innoson Vehicle Manufacturing Company Limited (INNOVEMCO),
will represent a breakthrough of sorts in the quest to transfer
the technology of advanced auto industries and adapt it to
suit the local needs. Hence, apart from the engines, axles
and other precision parts, all other components will be sourced
locally. Remarkably, the vehicles will not bear the monogram
of the technical partners; or that of any popular brand, but
will bear the name of the manufacturer – ‘Innoson’.
When Daily Sun visited the site (which is about the size of
five football pitches) a welter of construction activities
was going on as both Nigerian workers and a couple of Chinese
expatriates laboured to complete the erection of structures,
having accomplished the installation of the integrated body
finishing line, featuring the very modern electrophoresis
coating system and spray chambers.
Other segments of the assembly plant will soon be installed,
confirmed Chief Chukwuma, who is the chairman of the Innoson
Group of Companies. Next is the arrival of the other sets
of equipment, their installation and test-running of the plant.
“The rest of the equipment are on the way. In a few
months, I will be through with building the plant, and after
that, production will start”, Chukwuma disclosed.
Vehicle models, plant capacity.
When Innoson Vehicle Manufacturing Company commences production,
the initial run is expected to be about 20 buses a day. This
will be followed by mini trucks and other products that the
market demands. “We want to start with buses. After
buses, we will be producing according to the demand of Nigerians”,
the Innoson chairman remarked, stressing that the concept
is to make for the market vehicles that would be so competitively
priced that tokunbo (imported second-hand automobiles) would
be very unattractive.
Among other ‘secrets’ that will interplay to make
this possible, Innoson plans to produce some of the local
components in-house, while some others will be sourced elsewhere
in the country, an option which will reduce the cost of production.
This will culminate in the vehicles selling well below N1million
per unit; if everything goes according to his plan, as low
as N800, 000. The products are also expected to trickle to
the sub-regional (West African) market in the spirit of ECOWAS.
The motorcycle linkage
Chukwuma’s trajectory in business took off at a motorcycle
parts shop in Nnewi. He later progressed into marketing the
machines themselves, sourcing his stocks from well known motorcycle
manufacturers and distributors such as YAMACO, Bulous and
Leventis. In the course of travelling to Lagos to bring the
stocks to the East, experience taught him that as many as
1,000 units of motorcycles could be packed in one truck if
dismantled, as against the mere 20 that the same vehicle contained
when loaded fully built.
It was this ‘intelligence’ that Chukwuma transferred
to motorcycle importation. “Because of my experience
in motorcycle spare parts, I was able to find out why new
motorcycles were very expensive at about 180,000, N200,000,
N170,000. I discovered that the importers used to pack 40
motorcycles in one 40-feet container. With that 40 units in
one container, the cost rose by more than 30 percent because
the quantity was too small to cover the cost of freight.
“So, I went to China and knocked it down (dismantled
the motorcycles), then loaded 240 units in one 40-feet container.
When it arrived, I employed mechanics to assemble them to
get 240 motorcycles. That was the strategy I applied, and
that is why motorcycles are cheaper today. Initially, I did
it manually by employing many mechanics to do the assembling,
but I later bought an assembly line and it became cheaper
and faster.
“That is why a new motorcycle is today about N50, 000
to N60, 000. Tokunbo was then (in the 90’s) between
N80,000 and N90,000. But you can no longer see anybody importing
tokunbo, because nobody buys an old motorcycle when new one
is now affordable”.
Not satisfied with the credit of chasing imported second-hand
bikes out of the market by deploying his business instincts
to the importation of new ones, the Innoson chairman is using
the new plant complex in Nnewi to replicate the feat in the
vehicle manufacturing industry. And he is sanguine that with
the CKD sets imported the same way as the motorcycle’s,
and a good number of the components made by Nigerian parts/accessories
manufacturers, including his own Innoson Technical and Industries
Company Ltd, Emene, Enugu, the vehicles to be produced in
Nnewi will endear themselves to the market taking advantage
of their low price tags, and thereby driving the nail into
the coffin of used vehicles.
Quality standards
The logical question that arises here is: Can Innoson achieve
competitive pricing without undermining quality standards?
This was one of the questions Daily Sun asked Chief Chukwuma
after a visit to the expansive complex. “Yes. The vehicles
can be cheaper and still be of very high quality. We are not
interested in lower prices alone; we are also interested in
quality. We have long experience in spare parts and the assembly
of motorcycles, so we know how to apply quality standards”.
Daunting Challenges.
He disclosed that the assembly plant would have started producing
vehicles by now but for the big blow dealt on the Innoson
Group by the Nigerian Customs Service, which affected its
financial stability. In 2004, Innoson Nigeria Limited (the
motorcycle subsidiary of the Group), imported 25 containers
of CKD sets for use in the production of motorcycles at its
Umudim, Nnewi factory which has a bona fide manufacturer status
conferred on it by the Federal Ministry of Industry, and so
is entitled to the payment of a concessionary duty of five
percent tariff on imported inputs (CKDs, raw materials etc).
But amazingly, upon the arrival of the 25 containers at the
port, the Customs refused to allow Innoson Nigeria to clear
the goods at the concessionary rate. By the time the importer
had proved that his company was a duly recognised motorcycle
manufacturer, and, therefore, qualified to take delivery of
his goods at the approved rate, his efforts were again stalled
by the Customs. Unfortunately, this was in early 2006 even
after paying the sum of nearly N26million (having been coerced
into clearing the containers as overtime goods) as against
the assessed duties of about N9million as per the CRI (clean
report of inspection).
What followed was that without notice and for no convincing
reason, 20 of the containers were auctioned away. Meanwhile,
the bank that financed the importation of the 25 containers
valued at about one billion dollars (other costs added) is
breathing down the neck of the young tycoon who is in his
40s, a situation that has forced him to gather every kobo
made by his other companies to gradually repay the debt. And
this is retarding progress at the new Innoson Vehicle Manufacturing
Company Ltd.
Chief Chukwuma lamented: “I do not see why our government
will not intervene and look into such a problem… I can’t
get more money from the bank.
How can you take money from a bank to import motorcycle CKDs,
and without paying back you tell them to give you another
loan to import CKDs for a motor vehicle plant. Every month,
all the money I make here (plastic factory in Enugu) I take
to the bank, pleading with them to have patience because the
Customs must pay for the 25 containers. They have no reason
to auction or seize them, after all motorcycle CKDs are not
contraband.
“So, that is the major problem the motor plant is having.
Minus the problem, it would have started working by now. If
the Customs had told me I committed any offence to merit their
auctioning my containers, I would have accepted it. But, I
did nothing wrong. It is wrong to say I don’t have a
motorcycle factory”.
The Nnewi motorcycle factory was necessitated by the steep
rise in company’s sales volume which rose to over 600,000
units, and was in line with the Federal Government’s
policy on indigenous manufacturing in order to help the economy,
he said,
Silent industrial ‘revolution’.
Until the motor plant is completed and running, he does not
see any reason to make “noise” about either the
plant or its products. “Well, I don’t believe
in making ‘noise’. I believe that when you see
the vehicle on the road with the name ‘Innoson’,
then you will ask: ‘Is it true that it is made in Nigeria?
But, if I start making ‘noise’ and the vehicles
are not on the road yet, what is the noise all about? So,
making noise without the vehicles is of no use. When the vehicles
hit the road, people will see it and ask questions because
I am going to give it the brand name ‘Innoson’.
Regardless of the problems facing the motor plant, including
the kidnap of some Chinese expatriates at the site, the Innoson
chairman is optimistic that production would start in the
next few months. His confidence is buoyed by the fact that
apart from the equipment already installed, others “are
on the way”. The rapid speed at which work is going
on, is also a pointer that assembling will start soon.
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