Mecho Autotech, a startup company situated in Nigeria that specialises in the provision of automotive spare parts as well as repair and maintenance services for vehicles, was recently successful in raising $2.4 million in a pre-Series A fundraising round.
The Nigerian market is an area of particular interest to the corporation since it has more than 12 million registered automobiles, the vast majority of which are used vehicles, all of which need routine maintenance to prevent frequent failures.
The primary function of Mecho Autotech’s business model is to facilitate connections between owners of motor vehicles, be they individuals or operators of fleets, and repair and maintenance businesses for motor vehicles. When it comes to getting their vehicles repaired, customers in Nigeria often have three choices: they can go to mechanics that work for Original Equipment Manufacturers (OEM), aftermarket mechanics, or roadside mechanics.
The services offered by the original equipment manufacturer (OEM) are of a high quality but come at a premium cost, whilst those offered by the aftermarket and roadside mechanics are of a lower quality but are more reasonable.
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Progress Mecho Autotech has made so far
Through its network of over 110 approved workshops (including three that are owned by the company), Mecho Autotech has been able to assist the repairs and maintenance of over 6,000 automobiles since the company’s founding in 2021. These customers include both business-to-business (B2B) and business-to-consumer (B2C) customers. Olusegun Owoade, the CEO of the company, disclosed that locating high-quality replacement components has proven to be the most difficult obstacle in the process of carrying out these repair and maintenance requirements.
The expansion of Mecho Autotech’s after-sales spare parts value chain was one of the goals that the company had indicated it would pursue when it was seeking its seed capital. The company has recently received a pre-Series A investment, and as a result, it is increasing the amount of effort it is putting into becoming a wholesale distributor of spare parts.
It is estimated that the automotive aftermarket spare parts and maintenance industry in Nigeria is worth $8 billion, with spare parts accounting for 80% of the value of the industry. Vehicle owners in Nigeria spend roughly $650 annually on maintenance and repairs on their vehicles, on average. The automotive after-sales business is very fragmented and informal due to the large number of imported used automobiles that make up 90% of the market. The country has over 12 million registered vehicles. As a consequence of this fragmentation, the supply chain for aftermarket replacement parts is currently fractured.
The solution Mecho Autotech is offering
Mecho Autotech has formed a partnership with Global Brain Corporation, a venture capital business based in Tokyo, to oversee the importation and distribution of aftermarket replacement parts. This partnership is an effort to remedy the problem described above. Mecho Autotech is going to be connected with Asian aftermarket parts manufacturers that are interested in servicing the African market via Global Brain Corporation, one of the investors in the firm who is participating in this investment round.
Mecho Autotech will act as an importer, distributing its inventory of spare parts to more than 150 different parts dealers. These suppliers will disperse the parts throughout their network in order to satisfy the requirements of storefront proprietors and final consumers. This strategy has as its primary objective the elimination of the practice of storing high-demand spare parts like tyres, suspension parts, brakes, and batteries.
In addition to its endeavour in the distribution of wholesale spare parts, Mecho Autotech intends to launch an app in the fourth quarter of 2023. This application will give workshops access to working capital and replacement parts procurement, as well as provide vendors with tools to manage inventory sales and inventory finance.
The owners of corporate fleets will soon have access to new software that will make it easier for them to locate approved repair shops, gain access to maintenance financing, and manage vehicle maintenance data.
Mecho Autotech will collect data on the demand for spare parts through these specific applications in order to serve a variety of stakeholders in the supply chain. These stakeholders will have access to financing of up to 10 million yen, which is roughly $10,380. This financing will include inventory financing for vendors, working capital for workshop owners, and vehicle maintenance and parts procurement for corporate fleet owners.
Mecho Autotech already has access to a credit line of 650 million yen (about $675,270) from a single bank partnership, which will serve as the source of the company’s financing. This will be accomplished through bank partnerships. The company is in talks with other financial institutions about increasing the size of the line of credit it has available to it so that it can capitalise on the large money it brings in from commissions on vehicle repairs and additional earnings from maintenance subscriptions.