diff --git a/repo2docker/app.py b/repo2docker/app.py
index 3ca1325d..d89e430e 100644
--- a/repo2docker/app.py
+++ b/repo2docker/app.py
@@ -626,8 +626,12 @@ class Repo2Docker(Application):
             try:
                 docker_client = docker.APIClient(version="auto", **kwargs_from_env())
             except DockerException as e:
-                self.log.exception(e)
-                raise
+                self.log.error(
+                    "\nDocker client initialization error: %s.\nCheck if docker is running on the host.\n",
+                    e,
+                )
+                self.exit(1)
+
         # If the source to be executed is a directory, continue using the
         # directory. In the case of a local directory, it is used as both the
         # source and target. Reusing a local directory seems better than
diff --git a/tests/unit/test_app.py b/tests/unit/test_app.py
index 55845092..d45c28a4 100644
--- a/tests/unit/test_app.py
+++ b/tests/unit/test_app.py
@@ -8,6 +8,7 @@ import escapism
 
 from repo2docker.app import Repo2Docker
 from repo2docker.__main__ import make_r2d
+from repo2docker.utils import chdir
 
 
 def test_find_image():
@@ -124,3 +125,25 @@ def test_root_not_allowed():
             builds.return_value = []
             app.build()
         builds.assert_called_once()
+
+
+def test_dryrun_works_without_docker(tmpdir, capsys):
+    with chdir(tmpdir):
+        with patch.object(docker, "APIClient") as client:
+            client.side_effect = docker.errors.DockerException("Error: no Docker")
+            app = Repo2Docker(dry_run=True)
+            app.build()
+            captured = capsys.readouterr()
+            assert "Error: no Docker" not in captured.err
+
+
+def test_error_log_without_docker(tmpdir, capsys):
+    with chdir(tmpdir):
+        with patch.object(docker, "APIClient") as client:
+            client.side_effect = docker.errors.DockerException("Error: no Docker")
+            app = Repo2Docker()
+
+            with pytest.raises(SystemExit):
+                app.build()
+                captured = capsys.readouterr()
+                assert "Error: no Docker" in captured.err
diff --git a/tests/unit/test_argumentvalidation.py b/tests/unit/test_argumentvalidation.py
index 1cdc203a..11647e37 100644
--- a/tests/unit/test_argumentvalidation.py
+++ b/tests/unit/test_argumentvalidation.py
@@ -223,7 +223,6 @@ def test_invalid_container_port_protocol_mapping_fail(temp_cwd):
     assert not validate_arguments(builddir, args_list, "Port specification")
 
 
-@pytest.mark.xfail(reason="Regression in new arg parsing")
 def test_docker_handle_fail(temp_cwd):
     """
     Test to check if r2d fails with minimal error message on not being able to connect to docker daemon
@@ -233,19 +232,22 @@ def test_docker_handle_fail(temp_cwd):
     assert not validate_arguments(
         builddir,
         args_list,
-        "Docker client initialization error. Check if docker is running on the host.",
+        "Check if docker is running on the host.",
         disable_dockerd=True,
     )
 
 
 def test_docker_handle_debug_fail(temp_cwd):
     """
-    Test to check if r2d fails with stack trace on not being able to connect to docker daemon and debug enabled
+    Test to check if r2d fails with helpful error message on not being able to connect to docker daemon and debug enabled
     """
     args_list = ["--debug"]
 
     assert not validate_arguments(
-        builddir, args_list, "docker.errors.DockerException", disable_dockerd=True
+        builddir,
+        args_list,
+        "Check if docker is running on the host.",
+        disable_dockerd=True,
     )
 
 
diff --git a/tests/unit/test_subdir.py b/tests/unit/test_subdir.py
index 05a77af2..43d08fce 100644
--- a/tests/unit/test_subdir.py
+++ b/tests/unit/test_subdir.py
@@ -33,7 +33,7 @@ def test_subdir_in_image_name():
     assert escaped_dirname in app.output_image_spec
 
 
-def test_subdir_invalid(caplog):
+def test_subdir_invalid():
     # test an error is raised when requesting a non existent subdir
     app = Repo2Docker(repo=TEST_REPO, subdir="invalid-sub-dir")
     app.initialize()