Sunday, October 17, 2021

    Nigeria offers Dangote license to build car assembly plant

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    Dangote Group has been granted a franchise by the Peugeot of France Groupe to construct and operate an assembly plant in Nigeria.

    A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business’s (the franchiser) proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the business’s name

    The new assembly plant by Dangote-Peugeot Automobile Nigeria Limited DPAN is a joint venture between Dangote Industries Limite, the Kaduna State Government, and Peugeot of France PSA Groupe.

    This is coming after Dangote group made an initial ₦11 billion bid for majority stake in Peugeot Automobile Nigeria (PAN) from the Asset Management Company of Nigeria AMCON, an exercise which has remained unresolved for more than a year.

    Dangote group has now gone to invite tenders from members of the public for the construction of a new Peugeot Assembly plant to be located at Dutse, along the Kaduna-Abuja expressway, Kaduna, about 25 kilometers away from the present location of PAN Limited assembly plant in Kakuri industrial zone of Kaduna.

    What this means for competitors
    Competitors such as Innoson, Toyota, Kia, and Leyland Assembly plant may be in for a tough time as Dangote is known for selling goods at the slimmest of margins, in favor of quick turnover and revenue from after-sales services.

    His collaboration with the state governments means he will not face opposition from the state governments. Also, patronage from the state governments is also guaranteed since they are shareholders. Prior to its struggles, the government had been one of PAN’s biggest customers.

    Peugeot’s executive vice president for Africa and the Middle-East, Jean-Christophe Quemard, met President Muhammadu Buhari recently to discuss reviving local production in the country.

    Recall that in 2016, the Asset Management Corporation of Nigeria (AMCON) invited prospective investors to bid for its 79.3 percent stake in Peugeot Automobile Nigeria.

    AMCON acquired a majority stake in PAN in 2012 after taking over the company’s debts worth about ₦30 billion owed to some Nigerian banks.

    Peugeot Automobile Company of Nigeria PAN was incorporated on December 15, 1972, as a limited liability company with an authorized share capital of N3 million. It commenced full operations on March 2, 1975.

    After about two decades of smooth operations, the company ran into stormy waters after series of policy somersaults by the government and inadequate tariff protection for local assembly plants.

    By 2013, the company’ s revenue generation profile had dropped to a meager ₦2 billion per annum from about ₦30 billion a decade ago. Its market share dropped drastically from 20% to only 2%, with car sales figure declining from ₦31.7 billion in 2007 to ₦1.96 billion

    With a huge debt of N30 billion by 2011 and no prospect of a private investor willing to risk his money in turning it around, in 2012, the Asset Management Company of Nigeria (AMCON), acquired a controlling 80% shareholding and assumed board and management control.

    Dangote Group is a diversified conglomerate, with interests across a range of sectors in Africa. Current interests include cement, sugar, flour, salt, pasta, beverages and real estate, with new projects in development in oil and natural gas, telecommunications, fertilizer, and steel.

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