Advisory support cemented Doctor Auto Chain’s resilience
Mongolia has responded relatively well to the coronavirus pandemic, keeping the number of infections in the low hundreds. However, this accomplishment came at the cost of a dampened economy due to closed borders and restricted travel and trade.
Among many local businesses feeling the effects of the pandemic is Doctor Auto Chain LLC (DAC), a popular chain of car repair and spare parts shops.
The EBRD and its donors, including the European Union, the EBRD’s Early Transition Countries Fund (Canada, Finland, Germany, Ireland, Japan, South Korea, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Taipei China and the United Kingdom) and Japan, have been supporting DAC.
Originating as a small producer of car seat covers in 1998, DAC now has eight branches across Mongolia, including in the capital city Ulaanbaatar, Darkhan and Erdenet. In addition to car maintenance, the company offers spare parts and accessories. With few roads and mainly off-road driving beyond major cities, there is a continued need for skilled car repair and maintenance services, making DAC’s business one of the most vital services in the country.
The company has received support through the Bank’s Advice for Small Businesses initiative, helping it to introduce HR management standards, improved financial reporting and a management information system to aid with the development of its franchise business.
DAC also received a US$ 2.7 million loan from local Khan Bank, co-financed by the EBRD. Last year it joined the EBRD’s Blue Ribbon programme designed to provide broad support to high-growth small and medium-sized enterprises.
All this assistance has seen DAC has grow rapidly and triple its turnover in the last eight years and put the company in good stead to weather the coronavirus storm.
“We see a direct relationship between the advisory projects that improved our internal systems and increased profits,” says Ms Azzaya Sodnomdorj, DAC’s CEO.
However, this trajectory wavered due to the uncertainty brought by the Covid-19 pandemic. In spring 2020, DAC saw a 20 per cent reduction in customers, causing a negative impact on revenue and cashflow. Other challenges included long-term disruption of its supply chains, a decline in staff morale and delays in building new branches.
Despite these setbacks, DAC capitalised on its strong management systems and business thinking. It implemented a response plan to regroup resources, optimise expenses and postpone some development plans for 2020.
These changes helped the company’s sales recover to their normal level in June and it is now aiming not only to recoup the earlier losses, but also grow by 5 per cent compared to last year. DAC will also move forward with its plans to open two more franchise branches this year and aims to achieve 21 by 2023-2025.
DAC’s ambitious franchising model is based on the best international standards and has been in development since 2018 with the support of the EBRD and the European Union. Its world-class management system can be easily shared with the franchise owners and the ultimate goal is to expand to the Central Asian countries.
“We estimate there is a market for 100 franchise shops once we open our first flagship store in Kazakhstan by 2022,” says Ms Sodnomdorj.
The company’s next step will be to hold an IPO with EBRD’s international business advisory support in two to three years.