Grace Ashiru
Mecho Autotech, a Nigerian startup specializing in automotive spare parts, vehicle repairs, and maintenance services, has laid off an unspecified number of full-time employees from its 40-person workforce. The company attributed the decision to Nigeria’s tough macroeconomic environment and the instability of foreign exchange (FX) rates.
According to an email acquired by TechCabal, the remaining full-time employees will shift to contract roles. Those impacted by the layoffs are set to receive severance pay equivalent to one month’s salary.
Established in 2021 by Olusegun Owoade and Ayoola Akinkunmi, Mecho Autotech set out with the mission to transform Nigeria’s fragmented auto repair industry. The company connects vehicle owners, from individuals to fleet operators, with third-party workshops to deliver reliable and efficient maintenance services. To date, Mecho reports onboarding over 7,000 third-party mechanics across three workshops in Lagos and boasts a client base that includes notable companies such as Shuttlers, Moove, Tolaram Group, and Kobo.
However, despite its strong beginnings, Mecho has encountered increasing difficulties in sustaining its operations. Nigeria’s rising inflation has sharply diminished purchasing power, prompting many car owners to choose more affordable roadside mechanics over Mecho’s premium services, which predominantly utilize original equipment manufacturer (OEM) parts.
Adding to the challenges, foreign exchange (FX) volatility has driven up the cost of importing spare parts, further complicating the company’s ability to maintain its business model. Meanwhile, competitors like FixIt45 have started to diversify, exploring alternative revenue streams such as compressed natural gas (CNG) conversion services to better navigate the economic pressures.
In an email addressed to its employees, Mecho Autotech outlined the reasons behind its restructuring efforts: “After a thorough review of our operations, market conditions, growth strategies, and financial health, we have identified the need for adjustments. Nigeria’s challenging macroeconomic environment, coupled with ongoing foreign exchange risks, has had a considerable impact on our cash flow and operations. To secure the company’s long-term sustainability and remain competitive, we must implement some difficult but necessary changes.”
Despite this explanation, former employees have alleged that operational issues within the company began surfacing well before the layoffs. They pointed to financial difficulties, including delays in paying rent and incidents where electricity was disconnected at the office. Salaries were reportedly delayed for up to two months, while significant resignations—such as those of the heads of finance and sales—further highlighted the company’s instability.
In September 2023, Mecho Autotech secured $2.4 million in pre-series A funding to expand its services. The company outlined plans to develop an app aimed at facilitating inventory financing for vendors, streamlining sales processes, and providing working capital to workshops. However, former employees alleged that the app was never launched, casting doubt on the startup’s ability to achieve its ambitious objectives.
Mecho’s challenges highlight the broader difficulties facing Nigeria’s startup ecosystem, particularly in sectors dependent on imported goods. With rising inflation, currency devaluation, and shrinking consumer purchasing power, tech-driven businesses like Mecho Autotech are finding it increasingly hard to survive.
As the auto-tech industry continues to evolve, Mecho’s competitors and peers must adapt quickly by exploring alternative revenue streams and operational efficiencies to navigate Nigeria’s volatile economic environment.
