The Nigerian automotive industry is rapidly evolving with rising consumer demand for both new and used vehicle imports. This presents lucrative opportunities for entrepreneurs to launch car import businesses catering to the local market.
This comprehensive guide covers all the steps and requirements for starting a profitable car import venture in Nigeria from scratch as a beginner.
Conduct extensive market research.
Thorough market research is crucial before diving into the car import business to assess demand dynamics and identify opportunities.
- Analyse vehicle demand: study import trends for new and used cars by model, make, price range, etc. Identify the best-selling models in Nigeria.
- Assess growth drivers: factors for increasing purchasing power, expanding the middle class, easier access to auto financing, etc. driving automotive growth.
- Evaluate supply gaps. Local assembly plants currently meet only ~10% of demand. Imports fill supply gaps for premium, luxury, and used car models.
- Research pricing: track import duties, levies, and pricing markups across different vehicle categories to determine profitability.
- Study regulations: understand the laws, policies, and processes governing car imports in Nigeria. Research agencies like the Nigeria Customs Service, SON, etc.
- Identify distribution channels. Assess distribution models like authorized dealerships, independent retailers, online channels, etc.
- Talk to experts: Get insights from consultants, existing car importers, auto finance providers, customs clearing agents, and government agencies.
Market data will help determine the feasibility of the venture and guide business planning.
Select the right import model.
Car imports can be categorized into:
New Vehicles
- Franchise dealerships: Partner with automakers to become authorized dealers. requires a high level of capital investment but provides exclusive distribution rights.
- Independent dealerships: directly import new vehicles by establishing networks with foreign automakers, dealers, and auctions. Lower investment, but higher effort is needed.
Used Vehicles
- Foreign auctions: imports through public vehicle auctions in Japan, the USA, Canada, the UK, etc. Access to a wide inventory, but intensive screening is required.
- Private sourcing: network locally and overseas to source from used car sellers, trade-ins, insurance salvage, etc. Requires boots-on-the-ground sourcing skills.
Evaluate your budget, target segments, technical expertise, networks, and ease of operations before selecting the import model. Used cars offer lower startup costs, while authorized new car dealerships provide exclusive rights but require heavy investment.
Acquire operational licenses.
Importing cars into Nigeria requires various permits and licenses, including:
- Company registration: Register a company with the Corporate Affairs Commission to obtain an RC number and TIN.
- NCS importers code: Acquire an importers code from the Nigeria Customs Service to clear imported vehicles.
- SONCAP clearance: Obtain SONCAP certification from the Standards Organization of Nigeria for each shipment.
- Inventory registration: Register the car yard, warehouses, and inventory with the SON and Nigeria Customs.
- Dealership authorization: Get authorization from vehicle brand owners for official dealerships. Required for certain new vehicle imports.
- ECOWAS Trade Liberalization Scheme: Register for ETLS certificates for reduced import levies from ECOWAS states.
- Auto finance license: Obtain a license from the Central Bank of Nigeria if providing financing services.
Ensure all licenses and paperwork are in order before commencing import operations.
Set up sourcing channels.
Identify and develop reliable and cost-efficient channels for sourcing vehicles.
- Local auctions: procure used vehicles from the police, government, bank auctions, etc. within Nigeria. Provides access to tested vehicles.
- Overseas auctions: imports from used car auction houses in Japan, the USA, the UK, and other countries with established auction systems. Time-tested method to source inventory.
- Dealers and wholesalers: For new cars, establish networks with international dealers, authorized distributors, and wholesalers of automotive brands.
- Classifieds and online Scan local and international classifieds and websites to find used vehicle sellers and trade-in offers.
- Insurance and salvage: source from insurance companies selling off insured or salvaged vehicles.
- Private sellers: Use online and physical networks to find private individuals interested in selling their used cars.
Cast a wide sourcing net while focusing on regions known for exported used vehicles, like Japan and North America.
Understand import procedures and documentation.
Get well-versed in the import process, paperwork, and documentation.
- Product documentation: obtain a certificate of origin, a bill of lading, a commercial invoice, a packing list, etc. for each imported vehicle shipment.
- Pre-inspection: Conduct a pre-shipment inspection (PSI) in the origin country before export to verify vehicle details.
- Shipping and Customs: Arrange shipping logistics to a Nigerian port. Submit forms, pay levies, and clear vehicles at the destination port with Nigeria Customs.
- Registrations and standards: Register new vehicles with SON and used cars with the DMV. Obtain roadworthiness documentation from FRSC.
- Duty payments: pay import duty, levy, ECOWAS trade levy, VAT, and other applicable taxes to Nigeria Customs.
- Dealership agreements: For certain new car imports, execute dealership agreements with the automaker and submit them to Nigeria Customs.
- Insurance and bonding: Obtain marine insurance for imports. Acquire customs bonds as an importer.
Leverage professional clearing and forwarding agents to ensure compliance and efficient documentation.
Arrange logistics and clearance.
Seamlessly move imported vehicles from their origins to your inventory:
- Shipping and freight: Use appropriate vehicle carrier ships for transportation. Get competitive shipping rates.
- Transit parking: Use bonded container freight stations to temporarily park vehicles on arrival before clearance.
- Clearing and forwarding: Hire an experienced agent to handle documentation, inspections, permissions, and port clearances.
- Transportation to the yard: Use car carriers to safely transport cleared vehicles to your holding yard or showrooms.
- Inventory management: Maintain a detailed inventory of imported vehicles using software tools. Track from sourcing to sale.
- Damage inspections: Closely inspect vehicles at the port and yard for any shipping damages or shortages. File insurance claims promptly.
- Security: Install security systems like surveillance and alarms at yards and showrooms to prevent theft and vandalism.
Smooth logistics and clearance reduce costs and prevent delays in making imported cars ready for sale.
Structure Operations
Structure key operations based on the import model:
For used cars:
- Inspection and appraisal: Thoroughly inspect, certify, and accurately appraise each used car upon import.
- Reconditioning: invest in workshop facilities and technicians to repair, service, clean, and refurbish used vehicles.
- Pricing: Determine appropriate pricing based on vehicle specs, demand, customs duties paid, and profit margin targets.
- Warranties and insurance Provide warranties and facilitate insurance plans for buyers.
For new cars:
- Inventory and display: Invest in showroom facilities to beautifully showcase new cars from your dealership brand(s).
- Marketing and promotion: run marketing campaigns, digital promotions, and events to attract customers.
- Sales and customer care: Build a skilled sales team well versed in the vehicles and attentive towards customers.
- After-sales service: Provide after-sales maintenance and repair services, spare parts, etc.
- Dealer standards: Continuously maintain brand standards in facilities, promotions, customer service, etc. as stipulated by the automaker.
Structure operations factor in the business model, target segments, value proposition, and long-term strategy.
Develop robust distribution channels.
Create an omni-channel sales and distribution strategy:
- Showrooms: Locate attractive showrooms in high-visibility areas for walk-ins. Maintain vehicle displays, test drives, customer lounges, etc.
- Digital presence: Develop a user-friendly website with detailed car listings, promotions, online bookings, etc. Market actively on social media.
- Network with dealers: For used cars, partner with new car dealers, distributors, and mechanics to resell quality pre-owned vehicles.
- Corporate and government sales: Develop B2B distribution channels by pitching to corporate and government buyers. Offer fleet discounts and financing support.
- Classifieds: List cars on leading classifieds platforms in Nigeria. Provides additional sales channels.
- Referrals: Implement referral programs for existing customers and partners to gain organic reach.
- Auto malls: Look at options to sell through emerging organized auto malls in Lagos, Abuja, etc. that provide centralized sales infrastructure.
An effective sales network ensures maximum reach and conversions across diverse buyer segments.
Arrange inventory financing.
Car imports require substantial inventory financing. Some options include:
- Bank financing: Approach commercial banks for inventory financing and overdraft facilities by demonstrating business viability.
- Private equity: Attract investment from private equity funds focused on the auto industry for growth capital.
- Automaker credit: For official dealerships, avail inventory financing from the brand’s financing arm, like Kia Motors Finance, Toyota Financial Services, etc.
- Auction houses: Some used car auction houses provide inventory credit and financing support.
- Leasing companies: Partner with vehicle leasing companies, which can purchase fleet inventory and lease it out.
- Asset-backed lending: Use each imported vehicle as collateral to obtain asset-backed loans from banks and other lenders.
- Crowdfunding: Leverage emerging crowdfunding platforms to raise working capital from multiple investors.
Robust access to financing ensures sufficient liquidity to import car inventory while limiting financial risks.
Maintain regulatory compliance.
Strictly adhere to all relevant regulations and compliance requirements:
- Import quotas and restrictions: Follow the prescribed import quota limits and restrictions applicable to used cars over a certain age, petrol or diesel cars, etc.
- Duty payments: Ensure diligent payment of import duties, levies, and taxes to avoid penalties and seizures.
- Documentation: comply with all documentation requirements stipulated by Nigeria Customs, SON, NAFDAC, and other agencies.
- Dealership agreements: For official dealerships, honour terms and standards detailed in agreements with automakers.
- Inventory audits: Periodically conduct audits and stocktakes to account for all vehicles imported, sold, and remaining in inventory.
- Facility standards: Maintain registered facilities as per prescribed government guidelines on parking space, signage, customer amenities, etc.
- Licensing: Keep all permits, dealer licenses, and authorization documents updated.
Non-compliance can lead to financial losses, legal issues, and even import bans.
Build strategic partnerships.
Develop win-win partnerships to strengthen operations.
- Financial institutions: Partner with banks and other lenders to ease inventory financing, provide buyer credit, and expand sales.
- Insurers offer attractive insurance products through collaborations with insurance providers.
- Spare parts distributors: Partner with distributors of authentic spare parts and lubricants from various brands.
- Government agencies: Build relationships with agencies like SON, Customs, FRSC, and transport departments to facilitate smooth operations.
- Logistics providers: engage competitive shipping lines, freight forwarders, transporters, etc.
- Auto maintenance: network with leading auto service chains to provide servicing, repairs, and spare parts to buyers.
- ICT providers: adopt inventory management and dealership solutions from ICT companies to improve efficiency.
Strategic tie-ups provide operational flexibility, risk mitigation, and access to extended networks.
Implement digital marketing.
Leverage digital marketing channels and data analytics for enhanced reach and sales conversion:
- SEO-optimized website: Design an SEO-friendly website with quality content, vehicle photos, user reviews, etc. to drive organic search traffic.
- Paid ads: run Google and Facebook ads to directly reach customers searching for vehicles online.
- Social media: share promotions, new arrivals, and engaging content frequently on Instagram, Twitter, YouTube, etc.
- Email marketing: collect customer data for targeted email campaigns about new stock, discounts, events, etc. Send personalized offers.
- CRM: Maintain detailed CRM records of all leads, conversions, and customers for retention and repeat sales.
- Online reputation: Actively monitor and manage online reviews, ratings, and feedback about your dealership on different platforms.
- Conversion tracking: Use analytics to identify sales triggers and optimize conversion funnels on the website and digital platforms.
- Mobile integration: design websites and digital assets mobile-responsive with click-to-call, chatbots, etc. for on-the-go engagement.
Digital marketing is essential for brand visibility, lead generation, and sales in the current internet era.
Provide excellent customer service.
Excellent customer service is key to attracting and retaining buyers in the competitive automotive industry.
- Trained sales staff: invest in skill training programs on product knowledge, probing skills, responding to customer concerns, etc. for the sales team.
- Test drives: Allow potential customers to extensively test drive cars to build trust and make informed purchase decisions.
- Warranties and after-sales support: Provide warranties and maintenance packages. Have qualified after-sales support staff.
- Vehicle delivery: Offer free home delivery or arrange pickup as preferred by the customer. Make the delivery process smooth.
- Customer feedback: Continuously collect customer feedback through emails, surveys, review sites, etc. Use insights to improve service.
- Loyalty programs: Implement customer loyalty programs, rewards, and referral incentives to drive repeat and referral business.
- Online self-service: Allow customers to book service appointments, make payments, track orders, etc. through the website and apps for convenience.
- Resolution focus: train staff to promptly resolve customer complaints and issues to their satisfaction.
Exceptional service will boost brand reputation, customer confidence, and sales.
Conclusion
Launching a profitable car import business in Nigeria requires thorough research, strategic planning, robust operations, and effective marketing. By following the comprehensive steps covered in this guide, you can start a successful automotive import venture in Nigeria despite being a beginner. Stay updated on trends, leverage partnerships, utilize digital channels, and most importantly, put customers first.