Toyota Tsusho Takes Control of the Kenyan Motor Vehicle Industry

Toyota Tsusho, the trading arm of the Japanese multinational Toyota Group, has taken full control of Kenyan motor vehicle dealers DT Dobie and CICA Motors after buying all the shares from their parent company, CFAO Group.

DT Dobie, which is the authorized dealer of Mercedes Benz passenger cars and trucks, Volkswagen passenger and commercial vehicles, Jeeps, and Greatwall Pickups; and CICA Motors is the exclusive Kenyan distributor for two globally renowned brands: Hyundai Motors Commercial Vehicles and SYM motorcycles.

 CFAO Group, which was listed on the Euronext Paris stock exchange, was last valued at USD 2.5 billion, and will be delisted following its acquisition. Toyota acquired a 97.8 percent stake in CFAO in December 2012 for USD 2.3 billion (Kshs 243.7bn), at a valuation of 18.9x P/E, and last month bought the remaining 2.2 percent for USD 54 million (Kshs 5.4bn) at a valuation of 23.6x P/E, which represents a discount of 44.5 percent to the market average of 34.1x P/E.

According to the Cytonn Report, the buyout of DT Dobie and CICA adds to its full ownership of Toyota Kenya, with Toyota Tsusho now controlling a total market share of 24.5 percent in Kenya’s new vehicle market, second behind leaders General Motors East Africa, who have a market share of 34.5 percent. Toyota, DT Dobie and CICA now have seven franchises combined, including rights to distribute Mercedes Benz, Volkswagen, Jeep and Hino. This makes the combined operation one of the most diversified alongside CMC Holdings, which deals in Ford, Suzuki, Maruti, MAN and UD among others.

The report further stated that the acquisition of CFAO is aimed at helping Toyota expand its footprint in Africa’s automotive distribution business. This PE investment is driven by:

Policies that promote local content that is being instituted by countries like Nigeria and Kenya: These policies have resulted in restrictions on imports of second-hand vehicles as well tariffs on new vehicles. This is evidenced by the acquisition of Volkswagen franchise by DT Dobie from CMC Holdings, as the Volkswagen franchise recently 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 KVM,

The expanding transport corridor projects in East Africa: The improvement of East Africa’s transport network is expected to reveal greater logistics opportunities and increase the demand for commercial vehicles,

Growing demand for passenger cars in Sub-Saharan Africa: The demand for passenger and luxury cars is driven by increased levels of disposable income, improved road conditions and a young, vibrant population seeking increased mobility.

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