Auto companies are linking up with fast-growing, ride-hailing services, aiming to transform a threat to their business into a growth opportunity. They offer discounts or financing deals for drivers in the hope they will pick their cars or vans, which could also encourage their clients to buy them.
At Suzuki Motor Corp’s showroom in the Kenyan capital Nairobi, hundreds of its Alto compact cars are waiting to be collected.
Most of the customers are drivers for ride-hailing company Uber Technologies, which struck a loans and discount deal with the Japanese carmaker and South Africa’s Stanbic Bank at the start of 2018.
The Altos are branded “Chap Chap”, Kenyan slang for “quickly” or “chop-chop”.
Patrick Amenya, the sales director at CMC Motors, the local Suzuki franchise, said the deal had helped him sell “more vehicles than we normally would”.
Huge growth market for automakers
Africa should be a huge growth market for automakers. Transport links are weak and personal car ownership is low. There are 25 cars per 1,000 Kenyans compared to 786 in the United States, according to the World Bank.
The Alto deal in Kenya, soon to be extended to Uganda and Tanzania, offers car financing for top-rated Uber drivers at a price of 850,000 Kenyan shillings ($8,349.71), lower than the usual 950,000 shillings. The loans are repaid with the money the driver earns providing services.
Josphat Njoroge was quick to take up the offer.
“I used to to drive an Uber partner’s car. I used to pay him 50,000 Kenyan shillings per month, which was pressure because I had other needs like fuel and my own salary. I heard that Stanbic Bank was financing people up to 100 percent to enable them get their own cars, and that you could pay over time, which was good. I went to a meeting at Stanbic, signed the documents and I believed that since I was able to pay the partner, then I would manage to pay the loan as well,” Njoroge said.
Suzuki’s strategy has propelled it from the bottom of sales tables in Kenya, where it languished for decades with emerging brands from China, to the top five along with Toyota, Isuzu, Mitsubishi and Ford.
Nairobi is often a springboard for the rest of Africa. Uber, which operates in seven African nations and 13 cities, offers employment to more than 100,000 drivers.
Suzuki is planning to adopt the same strategy in those markets and financial institutions like Stanbic are also keen to get in on the action.
“So based on the fact that we have this data from these driver partners, we enable their business, give them an opportunity to access what the partnership can offer, and at the same time we take them on a journey to start learning how to run that business, how to grow it, and actually we believe we should be able to access the 6,000 drivers that Uber has on the platform,” said Mariane Ochieng, Stanbic’s head of vehicle and asset finance.
CMC’s Altos, which are tough and fuel-efficient, are made in India but could one day be made in Africa, Suzuki told Reuters.
However, drivers like Francis Mbugua are not convinced. He says the Alto’s selling points aren’t strong enough to help him navigate through Kenya’s economic realities.
The country’s car market is dominated by second-hand imports. New vehicles are perceived as being out of reach of many buyers, mainly due to the higher taxes that they attract.
“In a month you are expected to pay 40,000 Kenyan shillings and that’s too costly for me, plus Uber business is not doing too well at the moment because there are too many vehicles. So I decided not to sign up for the programme because of the financial strain. Although the car does not consume a lot of fuel it will still be stressful to pay back the loan,” Mbugua said.
Not everyone shares Mbugua’s aversion for risk.
Suzuki sold 523 Altos in Kenya this year, and CMC Motors has started discussions with Uber to increase the range of models available.
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