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Agreements With Ride Hailing, Delivery Firms New Business Strategy In Africa For Car Makers

Agreements With Ride Hailing, Delivery Firms New Business Strategy In Africa For Car Makers
Car makers have undertaken a strategy of luring tide hailing companies and delivery firms to increase sale in the African market.
For example, Japanese car maker Suzuki Motor Corp has struck a loans and discount deal with the US based ride-hailing company Uber Technologies and South Africa’s Stanbic Bank during the beginning of the current year.
Africa should be a huge growth market for automakers. Car makers can hope for greater market penetration because of weak transport links and low personal car ownership. According to the World Bank, for every 1000 Kenyans, there are 25 cars compared to 786 in the United States. However the financial capability of many in Africa of purchasing a car is very low – especially if it is for personal use.
Financing of up to 100 percent for top-rated Uber drivers is offered for the Alto model of Suzuki’s car in Kenya which would soon also be implemented in Uganda and Tanzania. Further according to the agreement, new owners would also be offered a price of 850,000 Kenyan shillings ($8,349.71) which is lower than the otherwise price of 950,000 shillings. The loans are repaid with the money the driver earns providing services.
All around the world, car makers are teaming up with the fast-growing ride-hailing or delivery services firms with the aim of transforming a threat to the car industry into an opportunity for growth. Such agreements offer new car owners discounts or financing deals for drivers hoping these would entice them to purchase the new cars.
Uber is being backed by Toyota while US ride hailing company Lyft has seen investments from General Motors Co. Uber and Southeast Asia’s ride-sharing app Grab have also had investments from Japan’s SoftBank Group Corp.
Dennis Awori, the chairman of Toyota East Africa, a Sendy investor, said that there is a trend that is slowly catching up in the delivery services industry too where companies are becoming less inclined to buy their own fleet of trucks and instead choosing to depend on a delivery service.
A pipeline of truck owners is provided to Sendy by Toyota. Awori and Malaika Judd, Sendy’s chief operating officer, said that discussions are going on about possibility of financing deal or discount even though they are not available at the moment.
This new strategy implemented by Suzuki has propelled the company helped the company to make significant market gains in Kenya where the company has not been successful for decades now due to challenges from emerging Chinese brands in addition to established car makers such as Toyota, Isuzu, Mitsubishi and Ford.
It will soon have the edge over the others, hopes Koichi Suzuki, Suzuki’s manager for the Middle East and Africa. In other markets, the same strategy is to be followed by the company.
Suzuki said that its Alto model, known to be tough and fuel-efficient, are currently manufactured in India but could one day be made in Africa.
There are over 100,000 drivers associated with Uber in seven cities in Africa.
“When you have a success story in one country in Africa, we can help to develop to a pan-African scale,” said Richard Bielle, head of Toyota’s business in Africa.
This year, $50 million was invested by Germany’s Volkswagen AG in a unit in Rwanda for the assembly of Polo, Passat and Terramont models.
“Most of the people might not be able to afford a brand-new car so the question is how do we do satisfy that market?,” said Michaella Rugwizangoga, CEO of VW Mobility Solutions.
“Our business model is to use the locally assembled VW vehicles to deliver our solutions for two years and sell them as second hand cars to the market.”

Christopher J. Mitchell

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