Mecho Autotech raises $2.4 million to disrupt Nigerian $10 billion spare parts market

Nigeria, Africa’s largest economy, relies heavily on imported spare parts to keep its growing automotive sector running. A recent report from a reputable media outlet found that Nigeria spends a staggering $10 billion annually on imported vehicle spare parts. This is due to the failure to revive the country’s indigenous steel industry. Now, one tech startup is aiming to disrupt the market and carve out a share of this lucrative business.

Enter Mecho Autotech, a Nigerian tech startup that offers automotive spare parts, vehicle repairs, and maintenance services. Mecho was originally launched to provide vehicle maintenance and repair, but it expanded its services to include wholesale spare parts distribution after realizing the scarcity of spare parts in the country.

Today, Mecho Autotech announced it has raised $2.4 million in a pre-Series A funding round backed by investment from Global Brain Corporation, Ventures Platform, and Uncovered Fund. With the new funding, the startup plans to introduce a B2B distribution platform for aftermarket spare parts. Leveraging its network of manufacturers in Asia, Mecho Autotech also plans to supply items such as batteries, tires, and suspension components to wholesalers operating in Nigeria.

The financing sources involve bank partnerships, with Mecho Autotech currently having access to a credit line of ₦650 million ($675,270) from a single bank partnership. The company primarily generates revenue through commissions on vehicle repairs and ancillary earnings from maintenance subscriptions. It is in discussions with other banks to expand its line of credit.

In a statement, CEO and Co-founder Olusegun Owoade said: “Spare parts vendors face frequent stockouts and struggle to access inventory financing. He added, “In our marketplace, vendors can source inventory from leading aftermarket spare parts manufacturers and access credit. By solving for spare parts stockouts, we can help solve one of the biggest problems in our industry.”

Mecho Autotech currently focuses on the Nigerian market, where approximately 90% of the more than 12 million registered cars require regular maintenance. Mecho Autotech connects vehicle owners, including individuals and fleet owners, with workshops that handle vehicle repairs and maintenance.

In Nigeria, car owners often have three options for vehicle repairs: OEM mechanics (high-quality but costly), aftermarket mechanics (affordable but lower quality), or roadside mechanics. Since its establishment in 2021, Mecho Autotech has facilitated repairs and maintenance for over 6,000 cars from both business and individual clients, working with over 110 approved workshops, three of which it owns. However, the company has faced challenges in acquiring quality replacement parts.

“We’re still connecting individuals and fleets with vehicle repairs and maintenance workshops. Now that we’ve entered the spare parts value chain, we see an opportunity to connect it with the original business by generating demand for spare parts from parts vendors via the app,” Owoade said.

“We also see the app as a tool for workshops to purchase spare parts and directly access working capital financing. As the number of workshops on the network grows, we can upsell and push consumers’ need for car repairs to them. We also developed free software for fleet owners to manage end-to-end operations, including visibility, maintenance, and fulfillment services.”

Mecho Autotech also plans to use part of its funding to expand its after-sales spare parts value chain and boost wholesale distribution. Nigeria’s automotive aftermarket spare parts and maintenance market is estimated to be worth $8 billion, with spare parts accounting for 80% of the value. Nigerian vehicle owners spend an average of $650 annually on these services.

The company will serve as an importer, supplying spare parts inventory to over 150 parts vendors, and helping prevent stockpiling of in-demand spare parts like tires, suspension parts, brakes, and batteries. To further improve the process, Mecho Autotech plans to develop an app that will enable vendors to receive inventory finance, manage their inventory sales, and provide workshops with access to working capital for acquiring spare parts.

Mecho Autotech’s entry into wholesale aftersales spare parts aims to address inventory challenges faced by parts dealers. Additionally, the company plans to develop a separate app for corporate fleet owners, allowing them to find approved workshops, receive maintenance finance, and manage vehicle maintenance data.

The startup also plans to collect data on spare parts demand from various supply chain stakeholders, providing up to ₦10 million ($10,380) in financing for inventory financing, working capital, and vehicle maintenance and parts procurement for corporate fleet owners.