Latest data from the Manufacturers CEOs Confidence Index (MCCI) has shown that activities of motor vehicles and miscellaneous assembly deteriorated below the benchmark (50 points) from 48.6 to 46.7 points.
The situation has been attributed to increasing production costs and weakened demand for locally assembled automobiles.
The MCCI also listed unpalliated subsidy removal, reduced sales, and low demand for new vehicles because of the eroded disposable income of the consumers as factors inhibiting the growth of the industry estimated to be worth around N302 billion.
The plunge to 46.7 points takes the business condition of the subsector close to pandemic levels when it went as low as 45.25 points.
It is also the lowest point (besides figures recorded during the pandemic) recorded from available data.
The MCCI also showed that the sub-sector posted negative readings across all indices used to measure the performance of MAN’s composite sectoral groups, making it the least-performing sector within Nigeria’s manufacturing ecosystem.
In the second quarter of the year, players in the sector saw production and distribution costs soar by 17.3 per cent, while cost of shipments increased by 14.7 per cent. Capacity utilisation in the sector dropped by 5.6 per cent, forcing local assemblers to cut their workforce by 5.7 per cent during the period.
Other indices which posted negative readings were volume of production (–6.1 per cent), change in investment (–5.6 per cent) and change in volume of sales (–6.3 per cent).
Despite the challenges the automotive industry is plagued with, it has in the last few years managed to record some positive strides.
The MCCI report showed that in the first quarter of 2019, business conditions in the sector went as high as 56.6 per cent, which made it the second-best performing sub-sector under manufacturing that year.
Business conditions remained above the 50 points benchmark until headwinds, which were propelled by the outbreak of the Covid-19 pandemic, hit the industry.
By the third quarter of 2021, the subsector’s MCCI points picked up once again, moving just above the 50 points mark, but began to take a downward dive in the fourth quarter of 2022, and decreased to 48.5 by the turn of 2023.
