End of an era as CMC Motors Group exits regional market after 40 years of operation

CMC Motors Group has officially announced its decision to exit the East African market after 40 years of operations, marking the end of a significant chapter in the region’s automotive industry’s history.

The decision comes amid a challenging business environment characterized by economic pressures, currency depreciation, and rising operational costs, which have made it increasingly difficult for the company to sustain its operations.

Founded in 1912 as Nairobi Motor Garage, CMC Motors began its journey by importing the iconic Ford Model T. Over the decades, the company evolved significantly, transitioning to local vehicle assembly in 1976.

This move allowed CMC to produce over 60,000 vehicles and establish itself as a key player in East Africa’s automotive sector. The company not only provided vehicles but also played a crucial role in supporting the agricultural industry through mechanisation solutions.

In a press statement, CMC Motors reflected on its contributions: “Over the past 40 years, CMC Motors Group has played a vital role in supporting East Africa’s agricultural sector through the delivery of quality service, mechanisation solutions, and steadfast support to its customers.”

Despite these achievements, the company faced mounting challenges in recent years.

In 2023, CMC Motors retrenched 169 employees as part of its exit from the passenger vehicle market after clearing stocks of brands like Ford and Mazda. This strategic pivot aimed to focus on agricultural machinery sales, particularly tractors, in response to changing market dynamics. Management acknowledged that despite these restructuring efforts and a transformation programme initiated in 2023, “market conditions failed to provide a sustainable path forward.”

The closure signifies not just the end of CMC Motors’ operations but also reflects broader economic trends affecting many established companies in Kenya.

The automotive sector has been particularly vulnerable as consumer purchasing power declines amid inflationary pressures.

Many consumers are opting for more affordable alternatives or postponing vehicle purchases altogether. This shift has forced companies like CMC to adapt quickly or risk obsolescence.

CMC Motors is not alone in its struggles. The company follows a growing list of legacy firms that have exited the Kenyan market due to similar pressures.

In December 2023, GlaxoSmithKline (GSK), a prominent British pharmaceutical company with nearly six decades of operation in Kenya, ceased local operations due to sluggish sales and opted for a distributor-led model instead.

Other notable exits include De La Rue, which left after experiencing low demand from the Central Bank of Kenya for banknote printing; Nestlé cited high operational costs and declining profitability amid increasing competition; and Cadbury shifted focus to serving Kenya from other African locations.

The trend continues with companies like Procter & Gamble planning to cease operations by late 2024 and Base Titanium scaling back due to dwindling resources and rising operational costs.

Even Africa Oil has shifted focus away from Kenya after facing significant tax liabilities. These closures highlight a troubling trend within Kenya’s business landscape where economic uncertainties prompt established companies to re-evaluate their presence.

Regulatory changes have compounded these challenges. Increased taxes on imported vehicles and parts have made it harder for companies reliant on imports to remain competitive against local assemblers who can navigate these regulations more effectively.

As legacy companies exit the scene, new players may seize opportunities that arise from these vacancies. Start-ups focusing on electric vehicles or innovative mobility solutions could find fertile ground as traditional firms retreat.

 Industry experts believe this shift may lead to a more diversified automotive landscape that aligns better with modern consumer preferences.

However, the immediate impact of these closures will resonate deeply within local communities that relied on these businesses for employment and economic stability.

The closure of CMC Motors Group’s operations will affect thousands of employees and their families who depend on these jobs for their livelihoods.

Communities that depended on CMC’s presence now face economic uncertainty as they adapt to this new reality.

The loss of such a long-standing player in the market raises concerns about job security and economic stability in regions where CMC had established itself as an employer and service provider.