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CMC takes on fast trains with plan for low-cost cargo trucks
CMC Holdings showroom. PHOTO | FILE
Auto dealer CMC Holdings plans to expand its heavy commercial vehicle assembly plant to cut unit costs and stem anticipated stiff competition from high-speed trains set for launch next year.
The CMC Motors Group chief executive officer Mark Kass said the expansion will see the firm produce most of its commercial vehicles in the country. “In the next three years we want 75 per cent of all our heavy commercial vehicles to be locally assembled.
This will not only bring prosperity and create employment for Kenyans, but also build confidence in Kenyan made products” said Mr Kass during CMC Motors Open Day held last week.
The auto dealer is betting on the anticipated lower unit cost to rev up demand for its cargo trucks despite the threat of the high-speed train on the Mombasa-Nairobi route. The Transport ministry has announced that the section of the standard gauge railway will be completed by March.
The State has already ordered 56 locomotives from China and indicated that a number of passenger coaches and cargo wagons will be available by the time the line is completed.
And to deal with the high-speed train’s threat to slow down the demand for its trucks CMC intends to capitalise on the government’s bid to encourage motor vehicle assembling.
Currently, the firm has an assembly plant in Thika which is partly owned by the government.
Mr Kass said the CMC is also seeking to benefit from tax incentives on import of completely knocked down units (CKD) — the parts needed to assemble a vehicle — which are zero-rated in Kenya as opposed to a 20 per cent import duty on vehicle imports.
Increased competition The CMC sold 453 units this year through to June out of the 7,154 units sold in the market according to a Kenya Motor Industry Association report from January to July 2016.
The dealer is the exclusive distributor of Ford, Mazda, and Suzuki models. It also distributes UD, Eicher and MAN range of trucks (medium and heavy commercial) and buses as well as Bobcat & Case construction equipment and New Holland tractors with an extensive range of farming implements from ploughs through to irrigation equipment.
The company has seven branches country wide and six divisions at its headquarters in Nairobi. The move to expand comes amid heightened competition from rivals in the heavy commercial segment.
In 2015 Kenya assembled 9,295 vehicles, of which 921 (close to 10 per cent of assembly) were light commercial vehicles (LCVs) such as pick-ups, and the rest were heavy commercial vehicles (HCVs) such as trucks and buses, according to Deloitte.
Regional hub Ashok Leyland, India’s second biggest maker of trucks and buses, said early July it will open a Sh1 billion ($10.4 million) bus factory in Kenya this year. This will be its first wholly owned manufacturing plant in Africa.
The giant auto maker which is the fourth largest manufacturer of buses in the world and the 16th largest producer of trucks globally said the Kenya bus assembly plant would act as its regional hub, with an annual capacity of making 1,200 buses. Ashok Leyland will assemble both buses and trucks at the plant.
“We are setting up a bus assembly plant in Kenya through a wholly-owned subsidiary. This plant will have an annual capacity of 1,200 buses,” Ashok Leyland senior vice-president (Global Buses), Thyagarajan Venkataraman said in a statement.
