Land Rover faces assembly hurdle at CMC division

A CMC Holdings showroom in Nairobi. The firm co-owns the Kenya Vehicle Manufacturers, which has been assembling the Land Rover Defender. FILE 

By DAVID HERBLING
 

 

In Summary

• Jaguar Land Rover needs fresh approval from owners of Kenya Vehicle Manufacturers to continue assembling Land Rover Defender models at the Thika-based plant.
• The company will need the blessing of CMC, which is said to enjoy a rapport with DT Dobie, to continue assembly at KVM.

South Africa-based Jaguar Land Rover is facing a fresh headache on the assembly of some of its brands at a plant co-owned by its top rival and former partner CMC Holdings.

The firm has been told it needs fresh approval from owners of Kenya Vehicle Manufacturers, including CMC, to continue assembling Land Rover Defender models at the Thika-based plant.

CMC owns 32.5 per cent of KVM, Treasury (35 per cent) and motor dealer DT Dobie (32.5 per cent).

Jaguar will need the blessing of CMC, which is said to enjoy a rapport with DT Dobie, to continue assembly at KVM.

This comes on the heels of a bitter falling out between CMC and JLR after the South Africa-based firm terminated its dealership in the Land Rover, Range Rover and Jaguar brands with CMC and transferred the franchises to RMA.

RMA started Kenya operations on Monday to feed the regional market with imported Range Rover and Jaguar brands, but is struggling to win a deal to assemble Land Rover Defender at KVM.

“We have the intention to continue assembling the Defender at KVM,” said RMA chief executive Sanjiv Shah at a press briefing on Wednesday.

“We’ve had three meetings with them. We need a shareholders’ approval (KVM owners) to begin assembling. We hope to hear from them soon.”

JLR threw its former partner CMC into a crisis on August 3 last year with the announcement that it would terminate its franchise agreement, blaming the autodealer for poor sales and marketing of its iconic brands.

The JLR brands accounted for nearly 30 per cent of CMC’s annual sales and the move would hurt the auto firm whose operating profits have been falling since 2008.

Mr Shah was speaking on Wednesday when he unveiled RMA Kenya’s fleet workshop and showroom located along Kampala Road in Nairobi’s Industrial Area. The firm plans to open two more branches this year.

Imports of vehicle parts used in local assembly are exempted from the 25 per cent import duty levied on fully-built cars — giving room to the assemblers to produce cheaper vehicles.

(Read: More than half of new cars assembled in Kenya on lower taxes)

This has seen a number of car dealers like Toyota, Nissan, General Motors and Chinese auto firm Beiqi Foton step up local assembly.

Official data shows that 6, 218 vehicles were assembled in Kenya in the year to December, representing 48.5 per cent of the 12,798 new cars sold in the same period.  This was up from 6,049 units assembled in 2011.

The growing preference for local assembly is expected to create more jobs and reduce idle capacity among the three plants —KVM, General Motors East Africa and  Mombasa based Associated Vehicle Assemblers (AVA). Simba Colt and Marshalls East Africa jointly own AVA.