Leading East African motor group CMC Holdings Ltd is poised to extend its reach. Chief executive Martin Forster talks to Jayne Flannery about the group’s expansion.
Mighty enterprises often spring from small beginnings. Such is the case with the CMC group of companies, which is now one of East Africa’s leading players in the motor industry. Founded in 1948 by two entrepreneurs with an eye for an opportunity selling Land Rovers and authorised share capital of just £10,000, CMC today operates five divisions and eight branches across Kenya with a staff complement of 1,300 employees.
“We are a centralised organisation but all our companies trade within the umbrella of the holding company, CMC Holdings Limited,” explains Martin Forster, group chief executive. “Each division has its own board and makes strategic recommendations based on their operations, but we maintain the final say.”
CMC Motors Kenya is the largest company within the group and accounts for 84 per cent of turnover. Over the years, it has developed exclusive franchise agreements with many of the world’s best known models, including Land Rover, Ford, Mazda, Volkswagen, Suzuki, Maruti and the Nissan Diesel range of trucks and buses. MAN commercial vehicles, Bobcat, New Holland and Case tractors are marketed alongside an extensive range of farming implements, from ploughs through to irrigation equipment.
Kenya Motor Industry statistics show that CMC Motors’ share of the market has risen steadily over the past three years from 14.8 per cent in 2005 to 19.6 per cent in 2009/10. Although the global slowdown has inevitably impacted on profits, sales revenue has been on a similar upward spiral for the last three years, recording Sh9 billion, Sh11.5 billion and Sh11.7 billion in 2007, 2008 and 2009.
“We aim to bring a one-stop-shop approach to the marketplace. Whether it is a small Suzuki car that is sought, or a 50-tonne truck, we can supply it,” states Forster. Earlier this year, the Ford Kuga was officially launched, which Forster expects to appeal to Ford’s loyal customer base as well as attracting new customers to the brand.
However, while CMC is locked in battle with Toyota to dominate the passenger car market, the battle has already been won at the heavier end of the transportation spectrum. “Our best selling vehicles are heavy commercial vehicles such as UD trucks from Japan and the MAN range of trucks from Europe which are a recent addition. We know that we dominate the market for large 65 seater buses where we have a 60 per cent market share and also agricultural tractors where we have a 75 per cent market share,” Forster points out.
The Land Rover, he explains, is still an eternal favourite; and CMC handles all the requirements of Kenya’s public institutions such as the government, police and army who show an unswerving loyalty to the Land Rover Defender.
Providing an excellent after-sales service has always been fundamental to CMC’s success.The core retail offering is complemented by a separate engineering division which provides a range of custom designed and built truck bodies, trailers and water tanks. Should accidents occur, another division is dedicated to accident repair, featuring the latest equipment in bodyrepair and re-spray booths. “We know we have by far the largest distribution network in East Africa not just for sales, but also for parts and service,” says Forster.
However, with success has come the inevitable problem of market saturation. As the local Kenyan economy has little more to offer, CMC has set its sights predominantly on new opportunities in Tanzania. The country has a stable and growing economy and now ranks first in Sub-Saharan Africa when it comes to contractsenforcement, and ranks tenth in accessing credit facilities as well as trading across borders, according to the latest report of the World Bank.
“We are investing more than $8.5millionin the commercial capital of Tanzania,” reveals Forster. “So far, we have spent $2.5 million on land and we expect to incur an additional $6million in building costs. We want a presence in Dar es Salam where we plan to have a showroom, parts and service facilities and a large bonded warehouse. Acquiring land has been expensive and difficult, but we plan to start building in December and expect the site to be ready in November2011. Once that site is up and running, we will look at establishing branches in important towns like Mwanza and Mbya.”
There is already a CMC branch in Kampala; and Forster believes there is scope for further expansion within Uganda, especially for trucks following the discovery of oil and gas deposits. “We have been active in Uganda since 1956, although we were forced out of business for many years during the regime of Idi Amin when an attack on a neighbouring building by opposition forces accidentally destroyed ours instead. Now, though, the situation is totally different and business is brisk again,” he comments.
Depending on the outcome of the January 2011 referendum which will take place to decide if the country should divide into two states, Forster also sees potential for expansion into Juba in South Sudan. “We must wait and see. If the outcome of the referendum creates a more politically stable country, then there will be new economic potential,” he says.
Last year, the global slowdown, coupled with an appreciation of the Japanese yen against the Kenyan shilling, caused a decline in profits. Imports of Japanese UD trucks—the name refers to the Nissan Diesel heavy commercial vehicle whose name was changed after Volvo Trucks of Sweden bought Nissan Diesel—created a temporary financial headache.
Forster is optimistic that a sound strategy is now in place to counter the erratic yen. “We have acquired the franchise this year to import and distribute MAN trucks. They are selling very well and because it is a European model, we pay in euros and that currency is much more stable.
“We are already in a much more stable position and the overall outlook for sales is steadily improving. There is plenty of room for CMC to grow in the rest of East Africa; and next year, we expect to see important new sources of revenue coming on stream,” he concludes. www.cmcmotors.com
