The resignation of Etop Ikpe as CEO of Cars45, a Nigerian-based digital automotive platform, was one of the most discussed topics in the Nigerian tech community in recent times. Left unaddressed, the discussion quickly led to rumours – fuelled by some media platforms – that there was a leadership crisis that was responsible for the exit of some co-founders and staff of the company. In this interview, Etop Ikpe speaks to BusinessDay’s FRANK ELEANYA on what really happened. He also speaks on the gaps in the automotive industry that led to the founding of Autochek, a company that has acquired Cheki Nigeria and Cheki Ghana.
What really happened with Cars45?
It all started with my resignation, and maybe the expectation of people was that something must have happened. The media misconstrued it. My quietness might have contributed to the narrative but it was because of the journey I was about to embark on. I don’t really see myself any longer as just being in the industry. I have seen the automotive sector, the value, and the potential that it holds. In India, the manufacturing segment of the automotive sector alone contributes 30 million jobs. 35 percent of manufacturing GDP in India comes from the automotive industry.
It is an industry whereby any single country globally has its automotive brand aligned to them. Look at how the West reacts to it and see where Tesla is at the moment. As I began to look at it, I wondered to myself that across the world you see the amount of impact the automotive industry brings and it is not like cars are not moving around in Nigeria, so why is the industry not providing as much value to people here? If you trace it back, you find out that in the 1970s Nigeria was manufacturing over 300,000 vehicles. We had Range Rover, Leyland, automotive factories manufacturing batteries, windscreens, and wipers. And you begin to question and say “What happened?” This is a sector that provided a lot of value, technical competence. What has happened?
I have come to realise that the automotive industry has become so fragmented, operating individually and that is the reason why there is little value there. So I internally dedicated myself to using the opportunities that I am lucky to have to create wealth and employment. I feel that the biggest problem we have in Africa is unemployment. We need to put people to work. I have seen that this industry can have a massive impact. For me, I would dedicate everything I have towards ensuring that I build solutions that can create wealth, especially for young Africans.
My resignation is a function of the dream I have for Autochek. What we are doing with Autochek is not for one segment. It cuts across the entire industry. What is the actual reason Nigerians don’t have cars? They want a place where they can access it and that is what we are trying to build. We are trying to build technology solutions and provide a solution to the people who trade with the platform to serve their customers. They don’t have to be there. The technology will do the job. I believe very strongly in the direction that we are taking being able to deploy solutions that can contribute to all the segments. So my focus is being able to offer people guarantees and warranties on cars that they buy and financing is very important. Less than one percent of vehicle purchases are transacted through institutional finance. These are not problems that one individual can solve.
The final thing is that nothing works without providing efficient maintenance and support. If you look at the industry overall, it is not possible to provide everything. If you look at the brand new car industry there is support there. 99 percent of the cars that are driven originate from being used cars. There is no efficient after-sales support. These are the sectors that we are aiming to solve. If we can bring all these sectors together, then people can have a better buying experience. People cannot finance a car if they do not have a guarantee that the car they are spending money on is going to be maintained, not by road-side mechanics who depreciate the car.
We realised that the industry in itself is a very symbiotic industry. All the various verticals within the industry support each other. We want to provide that technology that enables each of these segments to operate seamlessly with each other. These are the reasons that led to my decision. It is not a one minute-decision like the way the public perceived it. Having a purpose in life means that sometimes you have to follow that purpose. My goal transcends brand, I see people and I see lives.
Would Autochek be like a Super App?
It is not a super app yet but we want to be able to bring on every single player unto one central point for them to be able to offer services within the automotive industry. So we would basically be focused on maintenance, after-sales and financing, warranties, and eventually grow that space whereby both from a dealership perspective to a financing perspective. It is our knowledge of the industry that has helped us understand how these things work. From a consumer perspective, you can access all these services. You can also access cars from multiple marketplaces. As a dealer, you can serve a customer through multiple applications as well. It has made us very excited about what we are trying to do.
I guess you would understand a lot better as to why I made that decision. I have to point out that I would not make that decision if I was not confident in the leadership team in Cars45. It is an extremely experienced team, very innovative and I think they are going to do better than I ever did. That is the confidence that I have. Now it is time for us to focus on a deeper data problem.
Some people would look at it as “This is going to be a competition for Cars45”, what do you think?
What we are doing is symbiotic in the sense that we are focusing on the solutions that will be the catalyst for the industry. There is not one individual or player that we cannot work with. We are focused on solutions that will enable trade. I am very sure we are going to do more business in the future and I am sure we would announce partnerships in the future. I think it is people’s perception of competition. The reality of the solution is that the technology we are bringing to the market is one that would work with every single player in the market. We are trying to lay the bedrock for people to transact much more effectively. So there is nobody in the industry we cannot work with or partner with.
Outside Nigeria, you would notice that global brands like Mercedes, Volvo, Volkswagen have different brands sold at prices that many people can afford. Nigeria has limited versions of these brands. Many have said it is the business environment they have that is enabling that. What is your view?
That is the essence of bringing everything together so that there can be a lot more transparency in the industry. For instance, there are people that have bought cars with their own money in the last five years or ten but the problem is that they haven’t bought from any institutional body that can say this was how their usage was, this is how much they bought the car for, this is when they changed their next car. Nobody is collecting that information or data. Think about all the cars being maintained across the country, who knows what parts are being changed, what parts wear out so quickly? Everything is just based on guesswork. But the more people begin to use technology to transact, the more you can begin to have data to understand what kind of cars people should be using.
In the past, the Matrix (Toyota) was very popular but it has been discontinued . You know there has not been a replacement brand for the Matrix in Nigeria because it was discontinued internationally. Nobody is feeding that information back to say “This car should be continued in a way.” The G-Wagon has been released in China with a four-cylinder engine. Why are they doing that? Because they have realised that people in that market do not mind a big body with a small engine. That is the kind of data that should be fed into the local market for manufacturing but you cannot get that information if you are not already collecting the data of the transactions that are happening. Anybody that is going to invest would only be doing guesswork. Transactions are happening every day in Nigeria but there is no data. What is the average price of the car that is traded in the country? What are people trading on? Who are the people currently buying this car? What type of car are they buying?
If you have that data, the manufacturing would know this is what we should be making or this is where we should be going into. But the information is not available and that is why we are bringing the solutions to the market and why we are going through the dealerships which already exist. We do not need to create new dealerships. The dealerships are everywhere, just give them the solutions that would make them work. These are hard-working businessmen that have put food on the plate of their families for years. We just need to collect the data and enhance the workshops that are currently there.
What would acquiring Cheki achieve?
Cheki is a very amazing platform. It has been in existence for over ten years with a great reputation in the market and has supported a lot of dealerships and consumers. In fact, it was really the first digitized experience for most Africans in terms of buying a car. It has built a huge customer base over the last ten years. The previous owners of Cheki, ROAM fortuitously for me, have maintained a perfect relationship over the years. I have known them from my time at Deal Day. We have very similar views, and because they have been in the industry for so long, they have come to see what the industry needs. We have similar views on what the future of the automotive industry should be in Africa. It has given us a unique opportunity to be able to access a broad market that has accepted a lot of dealerships and consumers. It also gives us a perfect entry into two markets that we consider to be very similar and very core to the growth of West Africa. And because we have pan-African ambitions, it gives us the opportunity to access the market very quickly.
Vehicle financing has existed for a long time, yet not every salary earner can confidently work into a bank and access the credit. What do you think is missing?
There are four core reasons that will make it possible for a bank to lend. But sometimes financial institutions sometimes take on the operations of vehicle financing that they should not be doing in the first place. The four things the banks need to learn are 1) Conditional analysis of the vehicle. That means the actual condition of the car. 2) They need to be able to access the customers’ personal issues in real-time. This is because used cars are a unique item. If you are learning on a brand new car, I can go somewhere, it can take me more than one month to process the loan, but there are more than 1000 of the same car sitting inside a warehouse, and once my loan is ready I can go and process that car. But every used car is unique; two Corollas, two different engine performances. So every used car has a different valuation in itself. What that means is that if I want to take a loan on the car, it cannot be processed quickly, the likelihood is that by the time my loan is ready that car is not available. What are the chances that I would find the exact same car in the exact same condition and the bank is willing to lend on that car again? The pre-approval process is critical. 3) Is the residual value of that car. What is going to be the valuation of this car twelve months down? This helps a bank be able to weigh their risk. 4) The final thing is the disposal of the car. In the event that I recover this car from an individual because they are unable to pay, can I quickly liquidate this asset?
If I walk you through the process of a lender in an advanced economy, like the US, a lender never interacts with the car. The lender provides tools to the dealer and it is the dealers that offer to finance and incentivise financing for consumers. You do not need to go to the bank. Right there the dealer would ask you if you are interested, they would process your loan there for you because you have a credit score that is verifiable. They would process the loan and the bank would pay. Within two or three days you would pick up the car and walk away. If that customer defaults, the bank never interacts with that car. What the bank does is to issue an order for recovery. Somebody will recover the car, take it to an auction house and they would dispose of the vehicle and the bank would be paid its value. So the bank just does the job of lending.
Here if the bank wants to lend they go through the old cycle, they would be the one to do the credit, they would do the residual valuation, they would have to recover the car, and they would have to dispose of the car. That is not their job. But these things already exist in the country, the people that can do your conditional analysis, inspect and value a car for you are there in the industry. The dealerships are there. So we are bringing all these guys together to give a level of confidence to financial institutions that want to provide financing for vehicles. That way everyone has confidence in the processes in the market. The banks have to decide if they want to provide the tools for people to trade or do you want to trade along with them. We are focusing on technology.
Do you think Nigeria needs additional investors to provide car financing, or the banks have the capacity to provide the financing?
I think the banks have the capacity. But they have been a bit conservative in their approach to it. They are profit-oriented organisations, so I think if they see any good business venture, they will invest in it. We have several institutions already, and several commercial banking institutions are already participating, there are fintech lenders and microfinance banks. The more the financial institutions see the success of the project, the more they will be interested in investing in that solution. Initially, it was only fintech lenders offering payday loans, today financial institutions have gone there because they have seen value. It is the same thing in the automotive industry, if you provide that information, they have the balance sheet to actually provide.
Are you starting off with Cheki Nigeria and Ghana at the same time and which other markets are you looking at?
We are looking at all the strong markets in Africa, including North Africa over time. I and my team have had a good experience in participating in businesses across Africa. I have very good networks in Ghana, Kenya, and South Africa. The first thing is to find the right kind of individuals that will run those businesses, incentivise them well. Have the right kind of partnerships in place, the right kind of shareholders and investors who have a global pan-African reach. I believe that it is possible to do it.
When is it launching?
We cannot put an exact date to that and we do not want to put ourselves under unnecessary pressure. But I can assure you that our goal is to launch before the end of the year.
Is it true that some of the staff left to join you?
I can really speak about the career choices of other people. I had a very long career in the tech industry. The industry has given me an opportunity to work with so many different talented individuals. I want to thank those who have worked with me over the years and supported me to get to where I am. I have had the opportunity of working with different people in various sectors. It is a natural thing that some people would work with me. I can’t really speak for anybody that resigned.