The commissioner of lands listed the company’s land, estimated to be valued at more than Sh100 million, as one of the pieces targeted for state acquisition to pave way for the Eastern bypass that will connect Mombasa Road to Thika Road, to ease traffic congestion in the city centre.
Acquisition of the land which currently serves as the auto dealer’s major vehicle warehouse and service centre, will have a major impact on operations of the company according to an official of the firm.
The acquisition notice signed by lands commissioner Mr Zablon Mabeya was published in a gazette notice dated May 10.
“The acquisition will cause major disruptions to our operations. We have spent two years to raise the pre-delivery centre to its current high standards,” said the official who sought anonymity as negotiations with the government on the intended acquisition are still pending.
“The extent of the business disruption will depend on the lead time for the acquisition,” he added. Pre-delivery centres are an essential part of new auto dealers’ distribution chain and building customer loyalty since this is where servicing, storage, and inspection of locally assembled or imported vehicles is done.
A prolonged disruption of Simba Colt’s operations could slow down its business, interfering with its sales in the fast growing heavy commercial vehicle market in which its Mitsubishi brand has a large market share. Rivals like General Motors and CMC Motors could expand their market share at the expense of Simba Colt that gained a slight market share last year.
Simba Colt’s overall market share rose marginally to 18.4 per cent from 18.3 per cent in 2009 while General Motors East Africa (selling Isuzu bus and commercial trucks) raised its market share to 26.2 per cent from 20 per cent in a similar period, underlining growth in the commercial trucks segment.
CMC Motors that sells Nissan Diesel (UD) and Mercedes trucks, saw its market share drop to 13.7 per cent from 15.4 per cent in 2009. The market shares are based on sales data reported to the Kenya Motor Industry Association.
The government has invited Simba Colt and other affected land holders to submit their compensation expectations on 14 July. Up to 20 individual and corporate landowners are affected by the Eastern and North Eastern bypass projects.
Simba Colt is expected to buy another piece of land on Mombasa Road where there are still large parcels of land and where most auto dealers have established their warehouses and service centres, including General Motors, CMC Motors, and Toyota East Africa.
The forced acquisitions, covering more than 20 acres around Mombasa and North Airport roads, are expected to drive up the cost of new land targeted by the affected firms and individuals.
The rising demand for commercial and residential properties in Nairobi amid scarce land has seen developers buy more land on Mombasa Road to the East of the capital, a move that seen land prices there more than double in the past two years. For instance, an eighth of an acre in Mlolongo sells at about Sh1.6 million up from Sh900,000 in 2009.
The imminent loss of Simba Colt’s land comes at a time when the auto dealer is diversifying its business lines, going big into the property market that has in the past two years attracted more individuals, insurers and fund managers seeking high, assured returns.
The company is building a 200-room five-star hotel on Chiromo Road, Nairobi and is pursuing several other investments in the hospitality sector in a bid to reduce its reliance on the vehicle market that rakes in most of the group’s revenues.