CMC crashes local plan in drive for EA market

By James Anyanzwa

Auto dealer Cooper Motors Corporation (CMC) Holdings Ltd has dropped its local expansion programmes in pursuit of regional markets.

The latest move comes after the company’s six decades of operation in Kenya.

"Having operated in this country for 60 years we have reached a stage where we can now look at the other East African countries in preference to Kenya," says Martin Forster, the Group’s chief executive.

The motor company is in the process of setting up an $8million (Sh640 million) new vehicle project in the Tanzania’s capital Dar-es-Salaam.

"New investment in Kenya at the moment is quite limited. We are, however, investing quite heavily in Tanzania where we have acquired land and building a new vehicle project in Dar-es-Salaam," says Forster.

The company’s new investment comprises of an expenditure of $3 million (Sh240 million) incurred on land acquisition and $5 million (Sh400 million) on showrooms, parts and service operation.

"Our investment in Mbeya will follow much later once we have established ourselves in Dar-es-Salaam," says Forster.

The company’s existing investment in Kenya includes eight branches, five divisions in Nairobi and residential houses.

Last year, the company built a new engineering project in Changamwe, Mombasa to cover assembly of trailers and bus body manufacturing.

"We are, therefore, well placed to cover the next few years as far as our Kenya operation is concerned," says Forster.

Political volatility and costly investment environment have been major sources of concern for local and foreign investors in Kenya.

Soaring inflation figures and the global financial crisis exacerbated the problem causing some companies to lay off workers and to reconsider their investment decisions.

Investment strategy

Similarly, CMC Holdings expressed worries over the uncertainties created by the political leadership in the country, but denied having played a significant role in influencing its regional investment strategy.

"Obviously as a commercial company, we hope and pray that the Coalition Government will sort out all their differences and the various ministers will address more seriously the responsibility given to them. "The political uncertainties are obviously sad and create anxiety, but we have been in the country long enough not to be destabilised by these rather unfortunate squabbles," Forster told The Financial Journal.

Forster says despite modest recovery in motor sales in the last two years, the financial crisis in America, Europe and Japan has currently hit the margins.

"Although we are selling more or less the same number of vehicles and tractors as we did in 2008, which was a record for us, the financial crisis has drastically weakened the Kenya Shilling against the foreign currencies we use for importing our products," says Forster.

Available data indicates that the Japanese Yen, US Dollar and Euro appreciated by about 36 per cent, 14 per cent and eight per cent respectively against the shilling over the last six months, making the company’s imported products more expensive.

Amongst the mitigation measures, the company has put in place to cushion against the crisis, which has mainly affected its margin include increasing product pricing.

While the move has been accepted by the consumers of buses, trucks, and tractors, there has been a decline and some sales resistance as far as saloon cars are concerned.

The company’s target market is quite diversified with a strong grip on agricultural tractors and large and medium buses.

CMC controls 65 per cent of the market in the large and medium buses market segment and 70 per cent in the agricultural tractors market.

Towards the end of last year, CMC was the market leader on very heavy trucks with its Nissan Diesel products.

Market share

The company also targets the Government with its Land Rover products.

The company’s main competitors include General Motors, Toyota, DT Dobie, and Simba Colt Motors.

Last year, the company’s market share on motor vehicles averaged 24 per cent, but has since declined this year to around 18 per cent.

According to the company’s statistics, CMC’s sales turnover rose 24 per cent to Sh10.7 billion last year from the previous years Sh8.6 billion.

The company has set an ambitious target for this year, at Sh14.1 billion.

For the six months up to March 31, (beginning in October last year) CMC’s total vehicle and tractor sales stood at 1,304 units against a target of 1,625

Last year’s total sales figure stood at 1,503 units.

"The next six months going forward I believe we shall continue to be below budget, but will finish of in quantum just about level or slightly below the figures of last year," says Forster.

He expects the purchasing power of vehicles to decline as the Government diverts resources to feed the starving nation and to create employment opportunities.

CMC Motors Group Ltd, the largest company in the group is a leading player in the East African motor industry with exclusive distribution for Land Rover, Ford, Mazda, Volkswagen, Suzuki, Maruti, Nissan Diesel range of trucks (medium and heavy commercial) and buses, Iveco, Bobcat, New Holland and Case tractors and an extensive range of farming implements from ploughs through to irrigation equipment.

All these franchises are run as separate divisions within the company.