14 Oct 19

Could Mobility be a Salvation for OEMs in Africa?

Volkswagen has recently bet $50 million on that being the case.

As there’s little demand for new cars, Africa is a challenge market for OEMs. The region accounted for less than 1% of global new passenger car sales in 2018.

How then can OEMs and mobility suppliers develop MaaS solutions and crack the Rainbow continent?

African citizens have low purchasing power and few options when it comes to finance, so owning vehicles is out of reach for the majority. There is, however, a strong used imports market for those who can afford to buy.

Car manufacturers are developing experimental business models to crack the market for new vehicles – and many are banking on mobility.

While selling new cars in Africa may be a precarious enterprise, the continent has unique advantages that are helping to drive growth in mobility, particularly car-sharing and ride hailing schemes.

Africa’s reputation for innovation

Africa is well-known as an emerging market, Martyn Davies, managing director for emerging markets at Deloitte, describes it as one of the “progressive frontier economies”.

Although there are massive areas of mountains, jungle and desert that hinder transport, plus regions so far under-developed, some of Africa’s towns and cities are enjoying a reputation for innovation.

Rwanda, for example, operates a technologically advanced cashless public transport system and a budding IT sector. Its technological capability has enabled many OEMs and mobility providers to develop apps locally.

Investment in new mobility initiatives for Africa

Africa is urbanising faster than any other continent, at a rate of 4% per year, compared to the global average of 2%. Incomes and aspirations are rising, which makes this particular emerging market an ideal testbed for new initiatives. It is estimated that by 2030, 50% of Africans will be living in cities.

German maker Volkswagen has invested in a new business built around ride-hailing and car-sharing in the Rwandan city of Kigali. So, far it has 23,000 registered users and is averaging 384 rides a day.

The company is aiming to have 800 cars in the scheme by the end of 2019 and is opening certified service centres to support it. After two years, each vehicle will be disposed of into the second-hand market. VW is (literally) banking on combining all these businesses – new and used car sales, ride-hailing, car-sharing, parts and service - to make the company’s investment worthwhile.

A proving ground for mobility

Locally, Nissan is focusing on introducing electric vehicles and backing sustainability. The Leaf was the first EV introduced in South Africa in 2010.

Such is the desire to support new mobility initiatives, earlier this month (October 2019) the region held its first Smarter Mobility Africa summit in Gauteng.

Organised by Generation.e and hosted in partnership with the Department of Transport and Gauteng provincial Government, it provided an opportunity for public and private sectors to come together to navigate a smart, electric, connected and low-carbon future.

Explaining why initiatives such as this are increasing in importance, in a press release, Gauteng Provincial Government said: “Whilst there are many policies aimed at encouraging the use of electric vehicles and other forms of smarter mobility, there remains a gap between the policies and implementation thereof.”

Although early days, the word is encouraging and it seems Africa has the attributes required to make it one of the strongest emerging mobility markets in the world.

Authored by: Alison Pittaway