Overview of Kingsway Tyres: A Leading Tyre Distributing and Retailing Company in Kenya

Interview with Aashit Shah, CEO of Kingsway Tyres

What is your assessment of the sector in Kenya? What are the latest trends? Is the sector competitive?

In the last three to four years, the sector has become extremely competitive. In fact, the entire auto industry has gone through a 360-degree change. In 2015, new vehicle sales in Kenya for the big players like Isuzu, Toyota, CMC, etc., were altogether at about 20,000 to 25,000 vehicle sales. In 2017, 2018, 2019 that has dropped to 10,000. There was a 50% drop in new vehicle sales in the market. We are primarily driven by secondhand vehicles. That gives an idea of what is also happening in the tyre industry. When you talk about competition, it is primarily from China. That trend started in 2012, 2013. A lot of cheap, competitive, not reliable, and not branded products came into the market. The government is doing its best to try and fight the entry of illicit goods and to try and fight the ways people are bringing in tyres from China. But price has become an issue overall in terms of competitiveness. From the demand perspective, liquidity has its own challenges. This is especially evident in the last two or three years with the interest rate cap in 2016 in some segments, and transportation in particular. Our portfolio products are in every segment from passenger car tyres right up into earthmover tyres. But in transportation in long haul where customers are very highly leveraged with banks, banks have been in a very tough position not lending and not giving in to consumers. Transportation has taken a huge hit with the introduction of the SGR which will be very positive in the medium to long-term. Having rail and road from Mombasa to Nairobi is a very positive thing, but that has put a lot of transporters in a very tricky position, especially those that are relying on the Mombasa to Nairobi routes. So, there is a huge challenge with rates, demand, and that particular sector has gone through its own challenges. When you look at some other sectors like the sugar belt because we supply agricultural tyres, that is also going through its own challenges. Many of the government sugar companies are in poor shape, bad shape, or not even performing. The quality of the cane harvest has also not been good. Sugar farmers are equally in a lot of distress. That affects our agric areas. On the whole, farmers have been put through a lot with climate changes. Since the middle of last year to early this year, Kenya has had delayed rains and heat. That has impacted farmers and how they behave, their planting, the productivity of the farms. That also has had an impact in terms of how people are changing their behavior and what they are buying. Overall, there are tough conditions and it is challenging but exciting.

What is your share of the market? Where do you stand compared to the competition?

Our dream is to have a very clear visibility of the Kingsway brand across the country. We want to have tyre centers which are completely customer centric, focusing on ambience and experience, using state of the art technology to give customers a smooth and seamless process to purchase tyres, book their vehicles, service their cars, interact with our staff.

Our share of the market is between 15% and 20% in the Kenyan space. In some segments it is higher, such as in niche segments like 4×4, UHP, SUVs. What we have not given up is our focus on premium products and services. The entire market is influenced heavily by price and giving cheap products to consumers. In our portfolio products which are primarily our premium portfolio (Michelin, BF Goodrich, Kumho, Apollo, Goodyear) we have not given in to adding more Chinese products. In some segments, we have had to give in. For example, in the truck segment, transporters who are struggling are not willing to pay any more for more expensive products, even though we give all our technical services, show them cost per kilometer, give them fleet management, and fleet audits. The market has pushed them to the wall and they continue to buy the cheaper product. But we still do not have the cheapest product in the market. We focus on good quality products with a good margin that give a good value to the customer. Our reputation is also our biggest strength and we do not want to engage with products that affect that. One thing we have learned is that what we have been doing all these years has actually worked. So, we will never change that and we will continue selling or giving the right solutions and the right products, partnering with the right people, because that is really where our expertise lies. We do not need to have the infrastructure to sell Chinese products at cheap pricing. What we are really good at is being in retail, going out in different locations, giving the right service, training up people, and telling the market that we are truly the best. That takes time and effort. We have to maintain those overheads that come from that but in the long-term, that is where we have always strived to be. In the short-term, we can take a lot of punches and we are strong enough to face those challenges. It is easy to let yourself be influenced by how the market is behaving, but we continue to believe that premium is the route to take. We have been more than happy to add more premium products in different niche markets because that is where our true strength lies. Everything else is easy. Giving a product and price is actually not that difficult. The opportunity lies in differentiating yourself from what everyone else is doing and just focusing on what you truly believe in.

How do you compete with companies that are going the cheaper route?

The Chinese portfolio is completely price driven. People do not care about the brand. If you are a dollar more or a dollar less, that makes all the difference. But that is not where we want to be. We did not build a company for 60 years to fight over a dollar. That is not why we are here. We are good at promoting the brand. We do not mind taking a great brand from China which has standards, has names, and building it. But we are not willing to take any brand just for the sake of selling a tyre. That does not meet our purpose and our values and what we believe in.

What are the niche markets where are you already present and where do you want to enter?

Our association with Michelin, BF Goodrich, 4×4 is a very strong area for us, especially from a product perspective. When you look at a BF Goodrich 4×4 tyre and what it gives a customer in terms of performance, safety, durability, peace of mind, there is nothing better. It is double the price of any other tyre so you must have an art and a way to convince and educate the customer. It is one area we can always expand upon. If you can sell a BF, you can sell anything in the world. We are looking at ways and means of adding more niche areas, whether it is a different brand or a different portfolio of 4×4 products. Another area is the SUV and the UHP tyres. You see more and more high-end cars now such as the Range Rovers and Mercedes Benz. These are products where even though there is pressure on pricing, customers are willing to spend more to pay for the quality of the product, whether it is a Michelin, Apollo, Goodyear, Kanati. Other areas that are niche for us are the earthmover sector. These are big equipment organizations where the tyres are huge in value and cost, the application is different, you need more technical services from our team. These are not products you can sell over the counter. You need to go to the customer and really educate them and have teams on the ground to give the right service. Another area is agriculture. We need to ensure these big farmers that we have the right product for them. The entire port operations and the Kenya Ports Authority is an area where we can also give good service to customers. These are some of the niche areas that we are very strong in.

What makes the best quality tyres different?

The Chinese companies have improved over the last 10 to 15 years, unlike many years ago. There are a lot of good quality Chinese companies today who are investing in factories and R&D. Their vision is putting a lot of pressure on the Tier 1 companies like Michelin, Kanati, and Bridgestone. These companies are investing in the technology. A poor-quality product is where they reduce the weight of rubber, do not put enough money into R&D, copy patents from other organizations, and simply produce in volume and sell with no actual brand to it. A company like Michelin or Apollo puts 5% to 7% of their sales back into R&D. I have personally been to their R&D center in Clermont. It is just unbelievable. They are thinking 50 years ahead as to what they visualize a tyre to be, they do not think about today. You can imagine the amount of effort, time, testing, quality control in new technology, rubber technology, carbon black, steel. These are areas of not only increasing kilometers or mileage for customers but also about the ways of reducing cost for the end user. You cannot compare these two types of organizations. If there was a benchmark in the world, it would have to be Michelin with their attitude towards product and their culture. It is very important that the culture changes as well. You have companies that are very sales centric and all they care about is sales. But Michelin is very product centric and they really value their tyre. When they see their tyre, they know exactly what it means, how it was produced, and how to really value such an amazing product. We see different values in different organizations. Everybody aspires to be a Michelin, from the tyre to the organization to the way of doing things. You can easily tell the difference between organizations by how much they invest back into the company, how much they value their products, how much they value R&D.

Is the market customer centric or product centric as a whole?

Tier 1 players have been too focused on product centricity and they have forgotten about market. The change in strategy is as simple as becoming customer centric. It is easy for us at Kingsway Tyres because we have been customer centric for years. We are multi-brand and we have a solution under every tier to give customers whatever they need. For the Tier 1 companies, they have been so product centric that for them to change to be customer centric is not easy. You need to change the entire process from your attitude to your behavior to your communication to your approach. In theory, it sounds easy to implement, but in practice it is very tough. The CEO’s message for Michelin was very simple: we want to become customer centric. But that will take them 5 years. That switch is all about keeping the customer at the heart of the organization, listening more and talking less, understanding what customers want, what their obstacles are whether it is pricing or products or whatever it may be. It will take some of these companies a long time, but that is what the market needs. The market has been so disrupted in the last 10 years that your only choice is to change to customer centric. You need to really hear the customer, ask the customer what they want, what they need, and what you can do better so they chose you over anybody else. That is the reality.

What is your CSR policy?

CSR is a very emotional point, not only for Kingsway Tyres, but for the whole family. Where we came from 60 years ago, it was instilled in us from a very young age to always give back. Over many years, we have been giving back in very different ways, some formal and some informal. In the last few years, we have established the Kingsway Foundation. We now have an arm of the Kingsway Group that is chaired by one of our family members whose entire responsibility is to give back to the communities. This member is Dr. Manoj Shah. He is the Chairman of M.P. Shah Hospital. He is heavily involved with Lions International. He drives our entire Foundation, whether it is building schools, giving back to charity homes, helping the needy. In any small or big way, we capture all our activities via the Foundation. We are a large family of 30 members. If everybody does a little bit of something, the objective is to do even more and capture it. We do not need to shout about it, but we want to make sure that we are doing various activities to give back to the community. We built an amazing school in Machakos called the Amrita School where we have nearly 500 schoolchildren. Over the years, we have done a lot of different activities to give back to the community in various different ways and forms, both internally and externally. We look at our internal family and generations of families who have been working with us and helping them as well. They say charity begins at home. These are people who we are helping to build their houses, educate their families, pay medical bills. We have a very soft spot emotionally in giving back because our entire value system that we have created over the last 60 years is very family oriented.

What is one of your success stories that defines the philosophy of the company?

We truly value relationships. The market is tough and the economy is challenging, but we are not an organization that likes to disrupt relationships very easily. There are so many stories where our customers may have gone through a very bad time 15 years ago and have found a way to rebuild their businesses. Because of our communication, our support, and our relationship, today we are even stronger together. We could have very easily taken the opposite steps and been very harsh, very tough, broken communication, said they needed to pay or something went wrong. However, we firmly believe that when you have strong relationships and maintain those relationships and follow the correct way of doing business, whether it is now or later, at some point, your relationship will only get stronger. There are a lot of stories with customers, with stakeholders, with principal partners. Our association with Michelin is 30 years, Apollo Tyres is 25 years, Kumho is 35 years. The success story for Apollo is unbelievable. 25 or 30 years ago, Apollo started as a very small organization out of India. Their turnover was only $50 to $80 million dollars. Today, it is $3 billion. We saw that they had something to offer and we never moved away from that. We were offered for other partners to come onboard but we stuck with them. What we learned from each other is even stronger today. These partnerships where we have stuck together, won together, lost together, are some of our strong success stories. When there is no upper hand, when we have a win-win, lose-lose, and a very transparent, open relationship with everybody, you are always bound to win.

Project yourself to the medium term, three years’ time. What would you like to achieve? What is your vision for the company?

Our dream is to have a very clear visibility of the Kingsway brand across the country. We want to have tyre centers which are completely customer centric, focusing on ambience and experience, using state of the art technology to give customers a smooth and seamless process to purchase tyres, book their vehicles, service their cars, interact with our staff. We want some sort of ecommerce site where there is excellent interaction. We want to have a great team of people who are fully trained, fully aligned, and fully responsible to customers, the organization, and are fully committed. We would like to see a bigger footprint in the market. We are growing at a rate of two or three new centers a year. In the next two or three years we could have 30 or 35 centers in the country. We could support other dealers in a very different way, maybe through a franchise model or having an association with Kingsway Tyres where we can impart our expertise and train them on what we have learned over the last 60 to 65 years. That is the vision we see for Kingsway Tyres: everything under one roof, a great team, very family oriented, very committed, fully focused on technology, using technology, a great ambience, a great look and feel of our tyre centers, and a great customer experience. We want to also have products of niche areas in every segment whether it is Tier 1 which is the premium, the budget, or the Chinese. We want to have great partners onboard so we can offer customers the right solutions. When we have those right solutions, we will truly and always be the expert in the country.

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