Mr Viral
Mecho Autotech, a Nigerian startup offering automotive spare parts, vehicle repairs, and maintenance services, has laid off an undisclosed number of full-time employees from its 40-person team. The company cited Nigeria’s challenging macroeconomic conditions and foreign exchange (FX) volatility as key reasons for the downsizing.
Remaining full-time employees will transition to contract roles, according to an email obtained by TechCabal. Affected staff will receive severance pay equivalent to one month’s salary.
Navigating a tough market
Founded in 2021 by Olusegun Owoade and Ayoola Akinkunmi, Mecho Autotech set out to revolutionize Nigeria’s fragmented auto repair market. By connecting vehicle owners—ranging from individuals to fleet operators—with third-party workshops, the company aimed to provide reliable and efficient maintenance solutions. Mecho claims to have onboarded over 7,000 third-party mechanics across three workshops in Lagos and counts companies like Shuttlers, Moove, Tolaram Group, and Kobo among its clients.
Despite its promising start, Mecho has faced mounting challenges in sustaining its business. Rising inflation in Nigeria has significantly reduced purchasing power, driving many car owners to opt for cheaper roadside mechanics instead of premium services like Mecho’s, which primarily rely on OEM (original equipment manufacturer) parts.
Compounding the issue, FX volatility has driven up the cost of importing spare parts, further straining the company’s operations. Competitor FixIt45 has already pivoted to explore alternative revenue streams such as compressed natural gas (CNG) conversion services to adapt to these economic pressures.
Signs of trouble
In an email to employees, Mecho Autotech explained the necessity of the restructuring: “We have carefully reviewed our operations, market conditions, growth strategies, and financial health. Nigeria’s challenging macroeconomic environment, combined with ongoing foreign exchange risks, has significantly impacted our cash flow and operations. To ensure the long-term sustainability and competitiveness of our company, we are forced to make some difficult but necessary adjustments.”
However, former employees claimed that cracks in the company’s operations appeared long before the layoffs. They reported financial struggles, including difficulties paying rent and instances of electricity disconnection at the company’s office. Salaries were allegedly delayed for up to two months, and high-profile resignations—such as the departures of the heads of finance and sales—underscored the company’s instability.
Unfulfilled promises
In September 2023, Mecho Autotech raised $2.4 million pre-series A funding to expand its offerings. The company announced plans to develop an app to facilitate inventory financing for vendors, streamline sales, and provide working capital to workshops. Former employees claimed that the app was never launched, raising questions about the startup’s ability to deliver on its ambitious goals.
Broader implications
Mecho’s struggles reflect the broader challenges facing Nigeria’s startup ecosystem, particularly in industries reliant on imported goods. The combination of soaring inflation, currency devaluation, and declining consumer spending power has made survival increasingly difficult for tech-driven businesses like Mecho Autotech.
As the auto-tech landscape evolves, Mecho’s competitors and peers will need to adapt swiftly, exploring alternative revenue models or operational efficiencies to weather Nigeria’s turbulent economic climate.
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