Mecho Autotech, a Nigerian startup specializing in automotive spare parts, vehicle repairs, and maintenance services, has recently laid off an undisclosed number of its 40 full-time employees. The company attributed this decision to the difficult macroeconomic landscape in Nigeria and the volatility of foreign exchange rates.
According to an email obtained by TechCabal, the remaining full-time staff will be transitioned to contract positions. Those affected by the layoffs will receive severance pay equivalent to one month's salary.
Facing a challenging market
Founded in 2021 by Olusegun Owoade and Ayoola Akinkunmi, Mecho Autotech aimed to transform Nigeria's fragmented auto repair industry. The company sought to connect vehicle owners, from individuals to fleet operators, with third-party workshops to deliver reliable and efficient maintenance services. Mecho claims to have partnered with over 7,000 third-party mechanics across three workshops in Lagos and counts notable clients such as Shuttlers, Moove, Tolaram Group, and Kobo.
Despite its initial promise, Mecho has encountered significant hurdles in maintaining its business. The rising inflation in Nigeria has diminished purchasing power, leading many car owners to choose less expensive roadside mechanics over premium services that rely on original equipment manufacturer (OEM) parts.
Additionally, the volatility in foreign exchange rates has increased the costs associated with importing spare parts, further complicating the company's operations. Competitor FixIt45 has already adapted by exploring alternative revenue streams, such as compressed natural gas (CNG) conversion services, in response to these economic challenges.
Indications of difficulties
In a communication to employees, Mecho Autotech outlined the need for restructuring: “We have conducted a thorough review of our operations, market conditions, growth strategies, and financial health. The challenging macroeconomic environment in Nigeria, coupled with persistent foreign exchange risks, has had a significant impact on our cash flow.”