How To Start A Lucrative Car Dealership Business In Nigeria: The Complete Guide
If you live in an industrial city, you would have possibly asked yourself at one point or the other if there are more cars than humans in existence, given the endless stream of cars that ply the roads each passing day. Although cars have their inimical effects on the environment, there is no doubting the fact that automobiles are essential for advancing global economy. Of all the sub-segments of the automobile industry, car dealership is arguably the easiest and most lucrative with regards to ratio of skills required to business profitability. In other words, car dealership is a business venture for any entrepreneur to delve into whether or not they already have an in-depth understanding of the industry.
The overall automobile industry was placed at $5.3 trillion in 2017 and has been projected to reach almost $9 trillion by 2030. Car dealership, which was worth over $20 billion in 2020 is estimated to contribute about 37% to the global automobile industry by 2030. On its own, the car dealership sector (strictly used cars) is valued to reach $25.7 billion by 2025 at a CAGR of 4.82%. What this posits is that, although car dealership is not the biggest segment of the automobile industry yet, it contributes significantly to the market size. Within the forecast period, the same big names – China, the United States of America, Japan, Germany and India are expected to contribute the largest share to the global auto market in the world.
The auto market in Nigeria falls behind countries such as Morocco, Egypt, South Africa and Algeria. With the data of both new and used car sales, Nigeria records the sales of about 1 million car units in Nigeria. Most of the cars are passenger cars used for commercial transportation. According to available data, the Nigerian car dealership market comprises largely of imported fairly used cars popularly known as ‘tokunbo’. In 2019, Nigeria was reported to be home to over 11 million cars, with the majority of them spread across areas like Lagos, Abuja, Kaduna, Delta state, Port-Harcourt, Anambra, Kano, Ibadan and other major industrial areas.
In Nigeria, cars are used as a show of wealth and a source of wealth. With these factors in place, there is bound to be an unending demand for cars. This makes car dealership a very lucrative business in the country. Already, car dealers get massive profits from car deals, and the rates are bound to increase in their favour. If you’re planning to start a car dealership business in Nigeria or any other part of Africa, you have on your hand a ‘gold mine’ if you put in the right factors. This post provides a step-by-step guide to help you start on the right foot.
What Is A Car?
A car is a four-wheeled vehicle which operates on several energy types including petroleum, electricity, biofuel, natural gas, sun, propane, etc. Most cars in use today operate on petrol but given the need to save the environment and conserve natural resources, electricity cars, solar cars and biodiesel cars are now in circulation. As of 2020, flying cars are still well underway and will soon be available worldwide.
What Is A Car Dealership Business?
A car dealership business involves the sale and distribution of both used and new cars. A car dealer is the intermediary between the car manufacturer and the buyers/users of the cars. Most car dealers operate independently of any manufacturing company. They invest in the cars, and sell them to the final buyers and users.
Business Opportunities In Car Dealership Business In Nigeria And Across The World
1). Car Sales And Distribution:
Retailing cars is a highly lucrative business enterprise across the world. In Nigeria, the profit rate on a single car ranges from NGN300,000 to N600,000 excluding charges, import duties, custom fees and other surcharges.
2). Taxi/Shuttle Services:
Another business opportunity associated with car dealership is the shuttle business. Thanks to affordable used cars made available through car dealership businesses, any interested person can delve into taxi and shuttle business since it requires very few skills other than driving. In recent times, the Uber business has gained ground in most parts of the world. Anyone with a new or fairly used car can join the Uber or Bolt business to earn a decent living.
3). Auto Electrical Repair Services:
Automobiles need to be repaired, serviced and inspected regularly in order to get the best profits out of them. Car dealers necessarily have to keep their cars, especially the used ones, in good shape to make good sales. This requires the services of trained electrical engineers and expert mechanics.
4). Auto Legal Services:
The car dealership business has some legal framework to go with it. This ranges from import clearing, buying and reselling used cars, etc. To avoid getting into incriminating transactions or buying stolen cars, car dealers require the services of legal practitioners for proper paperwork.
5). Sales Of Auto Parts:
In addition to repairs and servicing of cars, replacing car parts become necessary to keep a car in good shape and to increase its marketability.
Facts And Benefits Of Cars
- Cars make up one of the smartest means for quick and easy mobility.
- Cars make up for the absence of public transport facilities.
- The word ‘car’ originates from the Middle English word ‘carrre’ sometime between 1350 and 1400.
- Cars are reflective of one’s social status.
- China, the USA, Russia, Japan, India and Germany have some of the largest markets for cars.
- In Nigeria, fairly used cars, also known as ‘tokunbo’, are more common than brand new cars.
- Cars operate on different energy forms, including the sun, electricity, natural gas, biodiesel, propane, petroleum, etc.
- There are almost 5 billion cars in use all across the world.
- It is illegal to drive a dirty car around in Russia.
- Toyota churns out a whopping 13,000 cars per day!
- About 280 million car tyres become scrap each year.
- The US military produced its own four-wheel vehicle in 1940.
- An average car has about 30,000 parts.
- An average of 60 million cars are produced each year.
- Honda Accord is reportedly the most stolen car brand in the United States,
- The world’s fastest car as of now is the Hennessey Venom GT at 270.49mph.
- There are about 35 million cars in the United Kingdom.
- About 3 billion gallons of petrol is wasted in traffic each year.
How To Start A Car Dealership Business In Nigeria: A Step-By-Step Guide
1). Conduct A Feasibility Study:
To start a successful car dealership business, you should conduct a detailed research into the basic factors involved. These include the type of car dealership you want to delve into, the possible success rate in your area, necessary permits and licences, required budget, as well as the most suitable location.
2). Develop A Business Plan:
Draft a comprehensive business plan that contains your business goals, step-by-step plans, budget, terms of business, legal framework, etc.
3). Choose A Location:
The business location of a car dealership business affects sales a lot. You should site your office in a busy industrial town for easy access and distribution. A typical car dealership office site requires just an administrative office and a garage where you can display the cars.
4). Obtain All Necessary Licences:
Car dealership requires a lot of paperwork and permits. In addition to registering your business with the Corporate Affairs Commission and an insurance company, you should also get a motor vehicle bond as well as a vehicle dealer licence, among other legal permits as they pertain to your state.
5). Stock Up:
This is the point when you get to buy the cars of choice. Remember to stock only cars that are preferred in your chosen area as revealed in your feasibility study.
6). List Your Cars Online:
It helps for a car dealership business to have an online presence. This widens your market and provides more sales opportunities. This is another way of running adverts for the business. Search Engine Marketing (SEM) and E-mail marketing are some of the ways to attract new customers. Also, ensure to update your inventory regularly.
7). Employ Staff:
The members of staff in car dealership business are typically the lot manager, the sales manager, service technicians, customer service representative, a couple of security personnel and a finance manager. For starters, you could do with the most crucial ones and enlarge the staff size later.
Challenges Of Car Dealership Business In Nigeria
- High startup cost
- Narrow profit margins on certain car brands
- Lack of trust in car dealers by the public.
- Difficulty in getting efficient and transparent salespeople.
- High competition
- Risks of shady dealings
- Expensive premiums, bonds and permits.
- Difficulty in getting cars in good conditions.
- Limited loan structure for car dealers.
To Sum It Up
Car dealership has its share of economic downturns from time to time but it is no doubt a highly lucrative business, especially if you understand your market well enough and provide them with the right brand. The car dealership business in Nigeria can be a lucrative and profitable venture to start-up, due to its vast market demand and on your ability to build a wide network. If you’re looking for a lucrative business to venture into, the car dealership business in Nigeria is a great option to explore.
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