German carmaker, Volkswagen is debuting its new ride-hailing service in Rwanda alongside larger plans to set-up car assembly operations in the East African nation, weeks after doing the same in Kenya.
After inaugurating its car assembly plant in Thika some 50kms from Nairobi, Kenya’s capital, the carmaker, which has been rocked by a series of emissions scandals, has now put Africa on its expansion radar with a flurry of investments targeting different countries on the continent.
Its entry into Africa’s ride-hailing market adds another mark on its bid to strengthen “its presence in emerging markets” with Africa ranking top on this agenda, according to brand chief Herbert Diess.
VW’s interest in the ride-hailing market began in May this year when it committed $300 million to Gett (formerly GetTaxi) some of whose key markets include London, Moscow and Tel-Aviv. But, early this month, the carmaker launched Moia, subsidiary based in Berlin to spearhead its push in the rapidly growing but highly competitive, ride-hailing market, which is dominated by Uber.
Volkswagen chose Rwanda as the launchpad for its ride-hailing services because it’s not as competitive as other major markets in Africa where Uber and a host of other competitors operate. Uber is yet to debut in Rwanda.
Ride-hailing services in Africa have become extremely popular in major cities such as Cairo, Nairobi and Lagos which are famed for monstrous traffic gridlocks, worsened by inefficient transport systems. The market has also proved to be a fertile ground that has given rise to a growing number of rivals clamoring for dominance.
Carmakers like VW, GM and others have invested in ride-sharing apps and self-driving car technology because of a growing belief that in the near future fewer consumers will need to own a car due to these options. By investing in ride-sharing apps for example it gives a carmaker better insight on the future.
Uber, which launched in Africa in 2012 in Johannesburg, South Africa, quickly expanded to other cities and countries across the continent, attracting both accolades and hostility in equal proportions. The service quickly outran Easy Taxi, which opted out of the African market following a decision by a key investor Goldman Sachs redirect all its investments in this segment towards Uber.
In Africa, Uber has in excess of 60,000 driver partners, with Cairo holding more than half of the Uber drivers on the continent. But, like elsewhere in the world, ride-hailing services’ disruption of local taxi systems were not initially met with merrymaking. Resistance by local operators and by regulation has been the norm in Egypt, South Africa, Kenya and Nigeria. There has also been a surge in home-grown competitors such as LittleRide, backed by Safaricom, the operator of M-Pesa, the world’s most successful mobile money service. This has opened a new battleground in the ride-hailing market: price wars.
But, Volkswagen’s double-edged strategy in Africa is seen as trying to quickly move past its emissions scandals. In Kenya, where it is assembling its Polo Vivo brand, with plans to expand to other models, it used to assembly cars in the market in the 1960s and 1970s. But, this space is now dominated by Japanese brands such as Toyota, Isuzu, Nissan and Mitsubishi, which assemble a range of cars locally.