Mecho Autotech, a Nigerian startup specializing in automotive spare parts, repairs, and maintenance services, has recently laid off an undisclosed number of its 40 full-time employees. The company cited Nigeria’s difficult macroeconomic conditions and foreign exchange (FX) volatility as primary reasons for this decision.
In an email obtained by TechCabal, Mecho informed the remaining employees that they would transition to contract roles. Affected staff members will receive severance pay equivalent to one month’s salary.
Company Background
Founded in 2021 by Olusegun Owoade and Ayoola Akinkunmi, Mecho Autotech aims to transform Nigeria’s fragmented auto repair market by connecting vehicle owners—from individuals to fleet operators—with third-party workshops. The company claims to have onboarded over 7,000 mechanics across three workshops in Lagos and counts clients such as Shuttlers, Moove, Tolaram Group, and Kobo.
Despite its initial promise, Mecho Autotech has encountered significant hurdles in maintaining its business. Rising inflation in Nigeria has diminished purchasing power, leading many car owners to seek cheaper alternatives, such as roadside mechanics, rather than opting for premium services that rely on original equipment manufacturer (OEM) parts.
Additionally, FX volatility has escalated the costs of importing spare parts, further straining the company’s operations. In response to these economic pressures, competitors like FixIt45 have begun exploring alternative revenue streams, such as compressed natural gas (CNG) conversion services.
Signs of Trouble
In their communication with employees, Mecho Autotech explained the necessity of restructuring: “We have carefully reviewed our operations, market conditions, growth strategies, and financial health. Nigeria’s challenging macroeconomic environment and ongoing foreign exchange risks have significantly affected our cash flow and operations.”
However, former employees reported that signs of instability had emerged well before the layoffs. They noted financial difficulties, including issues with paying rent and instances of electricity disconnection at the company’s office. Allegations of delayed salaries for up to two months and high-profile resignations, such as those of the heads of finance and sales, further underscored the company’s challenges.
In September 2023, Mecho Autotech raised $2.4 million in pre-series A funding to expand its offerings, including plans to develop an app for inventory financing, sales streamlining, and providing working capital to workshops. However, former employees claimed that the app was never launched, raising doubts about the startup’s ability to execute its ambitious goals.
Mecho’s struggles reflect the broader challenges facing Nigeria’s startup ecosystem, particularly for businesses reliant on imported goods. The combination of soaring inflation, currency devaluation, and declining consumer spending power has made survival increasingly difficult for tech-driven companies like Mecho Autotech.
As the auto-tech landscape grows, both competitors and peers will need to adapt quickly, exploring alternative revenue models and operational efficiencies to navigate Nigeria’s turbulent economic climate. The situation serves as a critical reminder of the vulnerabilities startups face in challenging economic environments.
