Five trends that will define Nigeria’s auto industry in 2024

Nigeria’s automotive industry is heavily dependent on importing new and used cars, including vehicle spare parts, due to its underdeveloped state.

As an import-dependent sector, economic headwinds, including volatility of exchange rates of naira to dollar, exchange rate of cargo clearing at the port, and surging inflation, pose serious challenges and limit the growth of Nigeria’s automotive industry.

Therefore, to enable industry players to prepare ahead to surmount these challenges and get ready to harness the opportunities the industry will present in the New Year, we look at the trends that will define the industry in 2024.

They include a surge in demand for sedans, a rise in demand for electric vehicles, FX rates and inflation, and pricing.

Demand for fuel-efficient cars

Fuel efficiency is a critical thing every Nigerian car buyer now looks out for, especially given that petrol is going out of the reach of the poor.

The removal of the petrol subsidy by the Federal Government in 2023, which led to an increase in pump price from N195/$ to over N637/$ has brought cautiousness in the minds of Nigerians, especially as regards the fuel consumption of the car to buy.

Based on this, fuel efficiency and the economical nature of a car have become determining factors while buying, and this will continue even in 2024. This makes many Nigerians pay serious attention to the type of car they buy.

Rise in demand for sedans

The nation’s used car market will likely see a surge in the demand for used sedan cars in 2024.

Sedans are more economical and fuel-efficient than sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs).

Giving an outlook for Nigeria’s car market in 2024, Maxim Makarchuk, COO of Cars45, said more Nigerians will prefer sedan vehicles over SUVs and MPVs because sedans are more affordable in pricing.

The rise in petrol pump prices in Nigeria is a key factor influencing the higher demand for used sedans, according to a report by Mordor Intelligence.

Rise in demand for EVs

Another trend that will become a driving force in Nigeria’s auto industry in 2024 is the increase in the demand for electric vehicles (EVs).

Globally, there is an increase in the rate at which EVs are accepted and used, such that nations are now paying more attention to building infrastructure, including public charging systems, to enable the use of EVs.

Nigeria is not yet in that category, but with the global shift towards sustainability, Nigeria is not immune to the rising interest in electric vehicles.

The Director of the National Automotive Design and Development Council (NADDC) said in a recent publication that by 2025, 30 percent of passenger cars driven in Nigeria will be electric-powered.

This means that as the year progresses, more people will shift from using petrol-powered engine cars to electric ones.

FX rates

The exchange of naira against the dollar and further devaluation of Nigeria’s naira will continue to determine the costs of bringing new and used cars into the Nigerian market in 2024.

In the last five years, prices of cars in Nigeria, especially brand-new cars, have skyrocketed due to the naira devaluation and high exchange rates.

In addition, the constant adjustment of the exchange rate for clearing imported cars and spare parts at the nation’s seaports by the Nigeria Customs Service (NCS) is resulting in a rise in the prices of brand-new and used cars in Nigeria.

Citing an example, Aissatou Diouf, general manager of Suzuki by CFAO, said that a brand-new car such as the Suzuki Grand Vitara, which was sold at N9.9 million in 2019 when the exchange rate was N362.60/$ and N24 million in 2023 when the exchange rate closed the year at N1,099.05/$ in the official market.

This means that the naira was further devalued compared to five years earlier, which is 2019, and it significantly impacted the cost of importing cars.

Inflation and pricing

In 2023, when the prices of brand-new cars and tokunbo vehicles ballooned due to surging inflation that hit 28.20 percent in November 2023, according to the National Bureau of Statistics (NBS), more Nigerians started holding on to their older vehicles longer than before.

The high cost of buying new or used vehicles in Nigeria leaves more people with no choice other than to keep the ones they have longer than usual.

This is such that individuals, families and companies that used to either upgrade or change their cars every four years now decide to keep their older cars for as long as they can, while some keep theirs for over nine years due to the large amount needed to buy cars in Nigeria today.

According to many Nigerians, this factor will continue even in 2024 as inflation and prices continue to surge. Therefore, many will continue to invest their limited resources into basic needs rather than buy new cars.