Range Rover brand owners issue stern warning to dealer

Troubled CMC Motors could be headed for tougher times after Jaguar Land Rover (JLR) - the owner of its flagship brands - expressed discomfort with the status of its franchise arrangement with the Kenyan firm.

In a letter addressed to CMC’s chief executive Bill Lay, JLR’s Sub Sahara officials said the marketing of its brands in Kenya was wanting.

The officials gave CMC’s management a deadline of April 2 to prove they can increase sales of the brands.

“JLR require a concrete plan that effectively addresses our concerns and brings to an end the constant broken commitments from CMC,” read part of the letter.

“Our expectation is that the CMC board and senior management teams now work on formalising a plan for the future of our brands in Kenya. The deadline for this submission is April 2, 2012.”

The JLR threat came despite Mr Lay and chairman Joel Kibe made a presentation to the franchise executives in South Africa last month on the strategic direction of the vehicle brands in Kenya.

CMC is also accused of delaying the setup of a modern showroom for JLR brands while its directors have come under fire for undermining the confidence of customers.

“The continued approach by CMC to expose publicly its business issues and boardroom disagreements is only serving to distance our customers,” read part of the letter.

JLR supplies CMC with its iconic utility and luxury British brands Jaguar, Land Rover Defender, Freelander, Discovery, and Range Rover.

These brands account for 30 per cent of the auto dealer’s annual unit sales, according to data from the Kenya Motor Industry Association (KMI).

JLR, which is owned by India’s Tata Motors,fears that the historical slide in sales of its brands in Kenya looks set to worsen because of CMC’s financial woes, boardroom wrangles and the attendant negative publicity.

KMI data shows that CMC’s sale of JLR brands fell steadily from a high of 661 units in 2007 to a record low of 292 units in 2010.

Sales of the brands however rose 38.3 per cent to 404 units last year.

The company made a net loss of Sh181.1 million in the year ended September on lower vehicle sales and rising expenditure.

In the previous year, CMC posted a net profit of Sh406.6 million which was more than half the Sh927.1 million it earned in 2008.

The weak performance is linked to the government’s decision to ditch fuel guzzlers such as Range Rover in 2009 and new austerity measures that saw the government cut its purchases of vehicles by billions of shillings in the medium term.

The government accounts for a quarter of CMC vehicle sales.

The drop in sales has seen CMC’s market share drop from 15.4 per cent in 2009 to 13 per cent last year though it remains the fourth largest dealer behind General Motors East Africa (GMEA), Toyota, and Simba Colt.

CMC’s luxury Range Rover brand, for instance, is widely considered as one of the ultimate status symbol in Kenya.

The sports utility vehicle, whose price ranges from Sh11 million to Sh20 million, is the preserve of tycoons, business executives, celebrities, and socialites.