CMC Motors to exit EAC market over high operational costs

After four decades as a powerhouse of East Africa’s agricultural and automotive sectors, CMC Motors Group is shutting down operations in Kenya, Tanzania, and Uganda, leaving hundreds of its employees in uncertainty.

Acquired by Dubai-based Al-Futtaim Group in 2014, CMC Motors on Friday cited ongoing market challenges, such as economic pressures, currency depreciation, and rising operational costs, for the shock decision.

“CMC Motors Group has decided to gradually wind down operations in full compliance with local regulations and distributorship agreements,” said the company in a statement.

It emphasized that the decision followed a comprehensive evaluation of the business landscape.

The planned shock closure marks a sad end to a glorious era for CMC Motors, which has distributed agricultural machinery and renowned passenger car brands across Kenya and the region for over 40 years.

“Throughout our history, CMC Motors has been integral to East Africa’s agricultural development, providing quality service and mechanization solutions to our customers,” the company said acknowledging the market challenges faced.

“Despite restructuring efforts and a transformation program initiated in 2023, the prevailing market conditions have not allowed for a viable path forward.”

The announcement sent shockwaves through its workforce and the region’s agricultural community that has long relied on CMC Motors for equipment, parts, and services.

The company pledged to support affected employees during this transition, ensuring adherence to all labour regulations for a smooth wind-down process.

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While the exact number of job losses remains unclear, estimates suggest it could involve hundreds of workers.

“The company is committed to ensuring a smooth and orderly wind-down in compliance with all relevant agreements and regulations,” CMC stated, though further details were not provided.

The potential loss of jobs in an already challenging economic environment exacerbates the situation for those affected.

“It’s a very painful decision,” said an anonymous CMC employee who reached out via text. “We are uncertain about the next steps, and this is a difficult moment for us.”

Despite its longstanding history, CMC Motors has faced declining fortunes, particularly following its delisting from the Nairobi Securities Exchange after the Al-Futtaim acquisition.

Established in 1985, the company played a pivotal role in mechanizing farms and has distributed some of the world’s leading car brands before losing key distribution deals.

Even as CMC retained exclusive distribution rights for New Holland Tractors, FieldKing Farm Implements, Nardi Farm Implements, and Hero motorbikes, it struggled with the loss of major vehicle deals.

Two years ago, the company laid off 169 workers after ending three lucrative dealerships due to poor local sales.

The affected employees were dispersed across branches in Mombasa, Nakuru, Kisumu, Nanyuki, Meru, Eldoret, and Kitale.

Following the loss of its partnerships with Ford, Mazda, and Suzuki, CMC shifted focus primarily to the agricultural sector.

With seven branches nationwide and six divisions at its Nairobi headquarters, CMC Motors Group boasts the largest distribution network for sales, parts, and service in East Africa.

“This is a devastating blow for the agriculture sector,” remarked Naivasha-based farmer Kamau Mwangi. “CMC Motors was a trusted partner for generations, providing essential equipment and expertise. Their closure will be deeply felt.”

The struggles of CMC Motors reflect broader economic challenges facing Kenyan businesses.

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Currency depreciation has inflated the cost of imported equipment, while rising operational costs and an increasingly difficult business environment have squeezed profit margins.

Additionally, a global economic slowdown has dampened demand for agricultural products.

“This is a wake-up call for policymakers,” said independent economist Ian Njoroge. “We must invest in infrastructure, foster innovation, and create a supportive environment for agribusinesses. Otherwise, we risk losing more critical players like CMC Motors, threatening the region’s food security and economic growth.”

As new car sales decline, the market for imported second-hand vehicles from Japan and the Middle East has surged, offering a more affordable path to vehicle ownership in Kenya.

Previously, CMC lost its long-standing dealership for Land Rover after Jaguar Land Rover shifted to the Thai firm RMA Group, and it also lost the exclusive Volkswagen franchise to competitor DT Dobie due to board disputes leading to its delisting.

Despite these setbacks, CMC Motors had expressed optimism about agricultural opportunities in Tanzania and Uganda, having sold tractors in both countries in 2022.