Four years ago, when Toyota Tsusho Corporation (TTC), the trading arm of Toyota Group, paid $2.65 billion to acquire 97.81 per cent stake in French firm CFAO, which owns Kenya’s DT Dobie, its fellow Japanese car maker Nissan walked out of DT Dobie, taking away almost 50 per cent of the business.
The deal had spooked Nissan, who felt that Toyota was likely to give priority to the sale and marketing of its vehicles at the expense of competing brands marketed by CFAO subsidiaries.
Years later, DT Dobie says it has dusted itself off the setback and bounced back, having gained the Volkswagen (VW) brand from CMC Motors, which it is now championing across the region alongside Mercedes, Jeep and Great Wall.
For the firm, the loss was huge, given that it had held onto the sole franchise distributorship of Nissan passenger and light commercial vehicles in Kenya for 50 years.
Started in 1949 by Colonel David Dobie, a veteran of the Second World War, the firm had opened its doors with the Mercedes-Benz franchise for East Africa, which included both passenger and heavy commercial vehicles, a deal it still has to date.
“It was my lowest moment seeing Nissan walk away,” DT Dobie executive chairman, Zarak Khan said.
“It was our second baby as a dealership and a brand that we had walked with and was performing exceptionally well. It was part of our DNA. Nissan felt uncomfortable despite our reassurances. That was a trying period for us. However, these were factors beyond our control. Its exit wiped out 50 per cent of our business.”
By the time Nissan was exiting the franchise agreement, it was one of the brands DT Dobie had relied on to grow its presence in the pick-up market in the region, where it competed with Isuzu East Africa and Toyota Kenya.
In the last year with Nissan under its wings, DT Dobie posted sales worth $97 million and a net income of $4.03 million. It is now left with the Mercedes Benz trucks under its wing on the heavy duty vehicles segment.
“We also lost employees who had grown with the Nissan brand and our shareholders came through to prevent this haemorrhage. We managed to hold onto some of the talent. In retrospect I want to look at it as a new dawn for our business because, around the same time, we brought in a new brand —VW — with which we are making very steady progress,” said Mr Khan, adding that this has been the highlight of his career with the dealership.
DT Dobie is now using the VW brand to fight for a larger share of the regional new vehicle market, pointing to bruising competition in the coming year as it sets up shop in Rwanda to push for the Kigali-assembled Passat, Tiguan, Amarok and Teramont, with a first phase assembly target of 5,000 units.
Mr Khan said that they have so far sold more than 200 units of its locally-assembled Polo Vivo, which was launched 18 months ago.
“To us this is an achievement. We are recruiting more new vehicle drivers for the first saloon car assembled in the country. Look at the environmental benefits too. Two hundred new drivers with an emission free vehicle. That is huge,” said Mr Khan.
VW introduced the Polo Vivo assembled car in December 2016, retailing at $16,500 and offering a warranty of three years or 120,000km to its new owners, the Kenyan price-sensitive middle class.
In Kenya, last year the Volkswagen franchise got a boost after the government committed to buying 300 of the Polo Vivo cars annually as they roll out of the Thika-based assembly firm Kenya Vehicle Manufacturer plant.
Under CFAO, it is also planning to play a big role in service parts industry, where it says will be the new frontier in automotive market, which it say has a high potential market of $2 billion. It already has Denso, Cool gear and Aissin as its exclusive parts partners.
In March this year, CFAO and Michelin announced an agreement for the import and distribution of premium quality tires in Kenya and Uganda.
Under the deal, the two firms, through a joint venture of 51 per cent by CFAO and 49 per cent by Michelin, will see the new entity have the exclusive rights to import into the two regional countries Michelin branded tires for cars, vans and light trucks. The new deal will also sees the joint venture firm import heavy goods vehicle, two-wheel, civil engineering and agricultural tires.
“We want to act as the link between vehicle manufacturers and the original equipment manufacturer so that we can provide the market with affordable yet durable parts whose safety we can guarantee,” said Mr Khan.
Last year CFAO Automotive, its parent firm sold over 51,000 vehicles on the continent from its 213 dealerships, bringing in $2.45 billion in revenues.