Mecho Autotech, a Nigerian startup specializing in automotive spare parts, vehicle repairs, and maintenance services, recently made the difficult decision to lay off an unspecified number of full-time employees from its 40-person workforce. The company cited Nigeria’s challenging macroeconomic environment and the instability of foreign exchange rates as the primary reasons for the layoffs.
In an email obtained by TechCabal, it was revealed that the remaining full-time employees will transition to contract roles, while those affected by the layoffs will receive severance pay equivalent to one month’s salary. Founded in 2021 by Olusegun Owoade and Ayoola Akinkunmi, Mecho Autotech aimed to revolutionize Nigeria’s fragmented auto repair industry by connecting vehicle owners with third-party workshops to provide reliable and efficient maintenance services. The company has onboarded over 7,000 third-party mechanics across three workshops in Lagos and has secured partnerships with notable companies such as Shuttlers, Moove, Tolaram Group, and Kobo.
Despite its promising start, Mecho Autotech has faced challenges in sustaining its operations. Nigeria’s escalating inflation has led to a decline in purchasing power, prompting car owners to opt for more affordable roadside mechanics over Mecho’s premium services that utilize original equipment manufacturer (OEM) parts. Additionally, the volatility of foreign exchange rates has increased the cost of importing spare parts, further straining the company’s business model. Competitors like FixIt45 have begun diversifying their offerings to navigate economic pressures, exploring alternative revenue streams such as compressed natural gas (CNG) conversion services.
In a communication to its employees, Mecho Autotech explained the rationale behind the restructuring efforts, citing the need to adapt to Nigeria’s challenging economic landscape and ensure the company’s long-term sustainability. Former employees, however, have raised concerns about operational issues within the company predating the layoffs, including financial difficulties, delayed salaries, and key resignations.
In September 2023, Mecho Autotech secured $2.4 million in pre-series A funding with plans to launch an app facilitating inventory financing for vendors and streamlining sales processes. However, former employees claim that the app was never launched, casting doubt on the startup’s ability to achieve its ambitious goals. The challenges faced by Mecho Autotech underscore the broader struggles of Nigeria’s startup ecosystem, particularly in sectors reliant on imported goods.
As the auto-tech industry evolves, Mecho’s competitors and peers must adapt swiftly by exploring alternative revenue streams and improving operational efficiencies to navigate Nigeria’s volatile economic environment. The fate of Mecho Autotech serves as a cautionary tale for tech-driven businesses in Nigeria, highlighting the importance of resilience and adaptability in the face of economic challenges.
