20 January 2018

Rwanda: Volkswagen Banks On Ride Hailing Service to Sell Cars in Rwanda

Photo: Wikipedia
Kigali, Rwanda

A taxi ride in Kigali will soon be in a brand new vehicle, off the manufacturing line of German carmaker Volkswagen after the firm decided to build a value chain for its plant in Rwanda with its own hailing app.

The company announced last week it would start production of the Teramont large SUV, Hatchback Polo and the Passat sedan in Rwanda and create a captive market with an app, a rival to Uber, which has not entered the country because there are no vehicle age limit restrictions.

Further down the chain, investors in the vehicles will employ riders, answering one of President Paul Kagame's key prayer of creating employment, especially for the youth.

On Thursday, the car manufacturer confirmed that it will be investing $20 million in a new vehicle assembly plant and car rental services in the country. The first vehicle is expected to come off the assembly line in the first half of this year.

Its strategy of going through a car hailing service to provide a direct market for its vehicles will set apart its investment in the region.

Last year, the carmaker invested $300 million in Gett, a firm which seeks to outmanoeuvre Uber by waiving "surge" pricing at peak traffic times.

Awesomity

Much more like the Uber taxi services in Uganda, Tanzania and Kenya, its car hailing services in Rwanda will operate through an online app, using around 150 vehicles for car pooling.

Thomas Schaefer, chairman and managing director of Volkswagen South Africa, said Volkswagen was ready to roll out its unique integrated locomotive solution system in Kigali.

"This will be followed by a ride hailing service with some initial 150 vehicles planned in the medium term in 2018. In 2019 public car sharing with an initial 250 cars will be launched and this will be followed by a shuttle service," said Mr Schaefer.

It is also understood that a local technology firm Awesomity won the tender to partner with Volkswagen to develop the innovative transport mobility solutions IT application, bringing into focus Rwanda's intent to build local capacity and also promote the local content rule for investors.

"I was impressed by these young techies from Awesomity who won the tender by Volkswagen to build the ride hailing application. They are tasked with developing an innovative transport mobility solutions IT application and I can't wait to see the outcome," said Clare Akamanzi, the chief executive officer of Rwanda Development Board.

"Think Blue"

Volkswagen Mobility Solutions Rwanda has already been registered to begin its operations in the country. It will rely on its Kenyan unit for experience in running the retail and production operation in Kigali as it seeks to build its Rwandan market.

The Rwandan unit will be led by lawyer Anastase Rutabingwa as its resident director.

"We are now fully committed to implementing our unique integrated automotive mobility solutions in Rwanda. We have finalised the layout of what we plan to do and some of the equipment including training materials and equipment are already sailing towards Mombasa port for delivery to Kigali," said Mr Schaefer.

The models that the company expects to assemble in Rwanda are said to be far friendlier to the environment than the company's older models and are in line with its "Think Blue" concept aimed at producing vehicles with low emissions.

The Rwandan plant got the nod to build more units than the Kenyan unit, which just does the Polo -- this could be attributed to the investment incentives Kigali offered the firm.

"We chose Rwanda because there is political stability, zero tolerance for corruption, growth of seven per cent and a young and tech savvy population. VW received strong support from the Rwandan government and co-operation from RDB. The country is also spearheading the Smart City agenda," said Mr Schaefer.

Affordability

VW will also not determine the price and affordability of these vehicles to Rwandans, but noted that the company was not looking to amass profits in the first phase of its operations.

"We are not here to make a buck; there will not be quick returns. We are here for the long term," said Mr Schaefer.

This could explain the move to tag along a ride hailing app to offer a ready market for businesses or individuals who will want to own these cars and also have them for business.

Currently, the country doesn't have a strict age limitations on car imports, which has discouraged firms like Uber, which banks on newer cars for their services, from launching in the market.

The Rwandan assembly unit is expected to have an annual installed capacity of up to 5,000 units.

Last week in a meeting with Kenyan President Uhuru Kenyatta in Durban, Mr Schaefer said they were looking to double production in the country and to introduce a new model at its Kenyan plant, possibly a hatchback (small SUV), while doubling production of the VW Polo Vivo to at least 300 vehicles.

The German carmaker said it will create about 1,000 new jobs in its first phase of the Rwandan operations. RDB announced last week that Rwanda registered a record $1.67 billion worth of investments in 2017, an increase of $515 million from the previous year.

"This project is in line with the government's policies to protect the environment, create jobs, and reduce our trade deficit. We are confident that this partnership will help create countless opportunities for young Rwandans not only in terms of employment but also in terms of skills transfer," said Ms Akamanzi.

In May last year, sub-Saharan Africa became the fourth region of operations within the Volkswagen Group, the others being China, South America and North America.

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