In forward moves to impacting the Nigerian automotive industry, Mecho Autotech, a startup specializing in automotive spare parts, vehicle repairs, and maintenance services, has raised $2.4 million in a pre-Series A funding round.
This milestone will facilitate Mecho Autotech’s mission of addressing the unique challenges faced by Nigeria’s vast automobile market.
Nigeria, with more than 12 million registered cars, primarily used, faces a constant need for vehicle maintenance and spare parts replacement to prevent recurring breakdowns. Recognizing this demand, Mecho Autotech’s core business centers around connecting vehicle owners, including individuals and fleet operators, with workshops specializing in automobile repairs and maintenance.
Vehicle owners typically have three options for automotive repairs: Original Equipment Manufacturer (OEM) mechanics, aftermarket mechanics, or roadside mechanics. While OEM technicians offer high-quality services, they often come at a premium cost. On the other hand, aftermarket and roadside mechanics are more affordable, making them accessible to most car owners, but they may compromise on quality.
Since its establishment in 2021, Mecho Autotech has facilitated over 6,000 vehicle repairs and maintenance services for both business-to-business (B2B) and business-to-consumer (B2C) clients. These services have been carried out across a network of more than 110 approved workshops, three of which are owned by the company. However, one of the key challenges faced during this journey was ensuring the availability of quality replacement parts, according to CEO Olusegun Owoade.
Mecho Autotech had previously disclosed that a portion of its seed funding would be allocated to expanding its after-sales spare parts value chain. The company is now doubling down on the wholesale distribution of these parts, thanks to its recent pre-Series A investment.
Venturing into Wholesale Spare Parts Distribution
The automotive aftermarket spare parts and maintenance sector in Nigeria is estimated to be worth a staggering $8 billion, with spare parts accounting for 80% of the total value. Nigerian vehicle owners spend an average of $650 annually on vehicle maintenance, and with over 12 million registered vehicles, of which 90% are imported and pre-owned, the automotive after-sales industry remains fragmented and informal. This fragmentation results in an uneven supply chain for aftermarket spare parts.
Mecho Autotech recognized the need to address this issue and subsequently secured a strategic partnership with Tokyo-based venture capital firm Global Brain Corporation. This partnership, facilitated by Global Brain Corporation’s investment in the startup’s pre-Series A round, will connect Mecho Autotech with Asian aftermarket parts manufacturers interested in supplying the African market.
Hiroto Sorita, Corporation Director at Global Brain Corporation, emphasized the substantial growth potential in Nigeria’s automotive after-sales market. He stated that Global Brain would support Mecho Autotech in parts procurement from Asian suppliers and assist in developing new services to penetrate the fragmented Nigerian market.
Digitizing the Supply Chain with Tailored Apps
Mecho Autotech seeks to boost the spare parts inventory and supply chain. The company plans to act as an importer, supplying spare parts inventory to more than 150 parts vendors. These vendors will form a distribution network that caters to the needs of workshop owners and end customers, eliminating issues like stockpiling in-demand spare parts such as tires, suspension components, brakes, and batteries.
To address the challenges faced by parts dealers and workshop owners related to inventory and finance, Mecho Autotech will develop an app in the fourth quarter of 2023. This app will enable vendors to receive inventory finance and manage their inventory sales. Simultaneously, it will offer workshops access to working capital and the ability to purchase spare parts. Additionally, a separate app tailored for corporate fleet owners will assist them in finding approved workshops, obtaining maintenance finance, and managing vehicle maintenance data.
Mecho Autotech intends to gather data on spare parts demand from these apps, providing valuable insights into the market supply. Furthermore, these stakeholders within the supply chain will have access to substantial financing options, with potential amounts reaching up to ₦10 million (approximately $10,380). This financing will be available for inventory financing to vendors, working capital for workshop owners, and vehicle maintenance and parts procurement for corporate fleet owners.
As Mecho Autotech continues to grow and expand its services, discussions with multiple banks are ongoing to increase its line of credit beyond the current ₦650 million (approximately $675,270). The company primarily generates revenue through commissions on vehicle repairs and additional income from maintenance subscriptions.
Mecho Autotech’s innovative approach to addressing the challenges of the Nigerian automotive aftermarket holds great promise for both the industry and consumers alike. With the introduction of digitized solutions and bridging gaps in the supply chain, the company aims to enhance the efficiency and accessibility of vehicle maintenance services across Nigeria.
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