How Autochek Provides Large, Affordable Car Loans To Africans
In October of last year, Autochek began operations in Nigeria and soon after expanded to Ghana, Uganda, Kenya and Ivory Coast. Autochek is an automotive technology company that harnesses technology, data, knowledge and experience to provide affordable auto loans to buyers and sellers. It also provides them with quality maintenance and after-sales service. In just over a year of operation, it has built a partner network of over 1,200 workshops and dealerships, and over 70 financial institutions on the platform approving and disbursing auto loans across Africa.
Speaking to “Building from scratch ”, a learning series for entrepreneurs powered by the UK-Nigeria Tech Hub in partnership with TechCabal, Autochek CEO Etop Ikpe explained what has helped the platform grow so much in such a short time.
Ikpe is a seasoned entrepreneur who has been at the forefront of the digitization of the auto loan process. Prior to becoming CEO of Autochek, he was co-founder and CEO of Cars45, another auto finance technology company. Under his leadership, the company expanded into two other African countries: Ghana and Kenya. He was Commercial Director of Konga and Co-Managing Director of the former DealDey, one of Nigeria’s largest discount stores at the time.
Etop explained that his entry into the automotive industry started as an experiment, after his experience in the digitalization of several industries – fashion and general merchandise. He considered the auto industry to be high value, high volume and high speed, but not getting enough attention. He realized he could make a big business out of it.
His previous experience in digitizing other industries gave him the opportunity to do extensive research on the African automotive market, and he discovered that there was a fundamental gap in funding.
“In emerging markets like Brazil, India, Indonesia, Malaysia, and much of Latin America, you find the average institutional credit in auto transactions – how many people buy a car through it? Loan utilization – around 65% to 70%, but less than 2% in most parts of sub-Saharan Africa. Africa’s per capita GDP is less than $ 2,000 and the average price of cars is around $ 5,000. It is then that you realize that sub-Saharan Africa needs credit.
When Ikpe did more research on this problem, he realized that it was not that there was no capital or cars available in Africa. It was because no one was supporting the ecosystem with enough intelligence around assessing and analyzing the conditions that would help investors competently deploy credit in the industry. Thus, Ikpe and his team wanted to take this average of 2% and try to reduce it to 50 or 60%, over five years.
Ikpe believes that the success of his business will have a ripple effect on the ecosystem and the society: “There is a huge opportunity for growth and an overall residual impact on the whole ecosystem, where the low penetration of credit results in lack of productivity despite the hard work of people. “
During the ‘Building From Ground Up’ interview, moderated by TechCabal editor-in-chief Koromone Koroye, Ikpe explained that mobility is important so that people can access healthcare, better opportunities for employment and business opportunities. “Access to mobility helps you get better opportunities. Low motorization rates lead to transport poverty, which means that, overall, it is so important that people can be more productive with access to better transport.
Expansion across Africa
Autochek’s expansion strategy is based on establishing key market nodes, economic powerhouses on the continent. After conducting research, he selects the regional leaders who oversee these nodes and their region. Ikpe explained that the economic powerhouse of North Africa is in Egypt or Morocco; West Africa in Nigeria; Francophone West Africa in Côte d’Ivoire; East Africa in Kenya; Central Africa in DR Congo; and southern Africa in South Africa. Thus, Autochek’s strategy consists of developing localized regional expansion strategies from these plants or nodes.
One of the main things that helped Ikpe start and grow the business was being impartial about the idea – focusing only on goal-based information and data. Another humbly assessed whether the product was suitable for the market without giving in to his preconceived market biases. To do this effectively, he listened to customer complaints and adapted the product to the market.
The expansion to other African countries showed the Autochek team that while there is a similar need for technology in each country, there are cultural differences to watch out for that could impact their business. Autochek realized that in some markets they needed to establish a high level of trust, while in others they needed to clarify the use of the product, guiding customers through a step-by-step approach on how to use the product.
They also found that in some markets, customers needed time to adjust to the product, while in others, the product depended on word of mouth to reach scale.
With the increase in the value of foreign currency driving up car prices and no increase in customer revenues, Autochek has struggled to ensure the affordability of its cars. This is a huge challenge because 90% of the cars sold by Autochek are imported into the country of sale. That’s why Ikpe said the company fully supports local auto manufacturing.
Despite this, Autochek still wants to offer consumers options when it comes to assortment and pricing. By extending credit and liaising with OEMs (Original Equipment Manufacturers) to reduce prices and increase their sales by, say, 20%, they would be able to convince more customers to do business with them.
To use Autochek to finance the purchase of your car, you can go to a car dealership using their product or go directly to their website where you will see various car stores like Toyota and BMW. Pick a car and start your loan application online or at the dealership. After you complete the form, your request goes to Autochek’s banking partner who then sends loan offers to the car buyer – up to ten – based on their credit score. You then go to the disbursement step: you go through the banking procedures, your car is registered, then goes through the Autochek management circle before it is ready to be collected.