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Is Volkswagen Using Rwanda As ‘Guinea Pig’ For Its Future Business Model?

22 Min Read

Joselyne, a young female driver with the Volkswagen Mobility solution in Rwanda, walked out of the car and opened the door for her passenger.

The Kenyan man, Paul, in his thirties, was on a business trip to Rwanda when his Rwandan friend booked a ride to meet his other business associate.

Joselyne, a university student in her twenties, smiled and invited Paul into the car, a VW Polo sedan.

Paul smiled and slid into the cab and off they drove.

The female taxi driver is one of the 250 drivers running the company’s mobility concept launched in the country in July 2018.

More than one year later, the company has introduced its e-golf car to test the terrain after gathering valuable information and conducting a robust assessment of its hailing solution in Rwanda, the one its CEO, a Germany schooled scientist, Michaella Rugwizangoga, calls ‘Moving Rwanda’.

The concept, she says, runs on a fleet of 200 cars, mainly Polo, through its Move App, with 30,000 active users and 30,000 dormant users who might have downloaded it in excitement when the company launched last year.

So far, the company has registered about 30,000 rides, each ride at Rwf600 ($0.65) its starting fair. The fare increases by Rwf720 per kilometer.

The fare is set by the Rwanda Utility Regulatory Agency (RURA).

Move’s fare is the lowest in the taxi industry, and has caused a storm. “We invested in Rwanda because we trust the government’s decision to take care of the market fares,” says Rugwizangoga.

Private taxis cry foul

The mobility concept is the most preferred option for individual hire so far, squeezing out independent taxi drivers, and albeit disrupting the industry.

“I love it,” says one Frank Mutabazi, a passenger who rode in a VW Polo to submit his business proposal on a rainy Monday morning in Kigali city.

“It is cheaper, clean, new and easy to find. I made simple prompts on the app and the car was here in three minutes,” he told Taarifa.

While some passengers prefer Move rides, independent taxi drivers are making painful calculations to remain operational amidst growing competition from VW.

“We don’t fear competition,” says Dieudonné, a father of four who has been in the business for over a decade. “We are only suffering from unfair competition, unfair treatment and that is troubling us.”

Indeed, VW enjoys red carpet treatment, understandably after committing to invest US$20 million in its initial phase and introducing a green transport system with plans to stop production of combustion engines in the next decade.

Its launch in 2018 was held on a hilly outskirt of the capital city, Kigali, and President Paul Kagame blessed its inaugural entry into Rwanda as a guest of honour, signifying the company’s affinity with the powers that be.

On October 30, Prime Minister Edouard Ngirente, attended the launch of its e-golf in the country, again highlighting heavy weight privileges the company enjoys. Few investors and local businesses are accorded such monumental treatments.

Notably, when VW launched shop, their main purpose was to assemble cars for sale in Rwanda, and that was their initial brand positioning strategy promoted they.

They have since switched focus on Mobility Solution and flooding cabs to disrupt a small consumer market.

What are the implications?

First, VW cabs are not branded as taxi cabs, yet all other taxis are painted with patches to differentiate them from private cars.

“That is a signal of favouritism,” says Dieudonné, the taxi driver who drives from Bugesera district to find passengers in the capital city.

“We have seen that passengers prefer riding with VW because they are not painted, they look like private cars, and that alone takes away a huge number of clients from us.”

They mobilised themselves and requested the regulator to oblige VW to paint their cars to level the playing field. Their request did not yield any positive results.

“That colour painting was done several years ago…what we require going forward is uniformity, so that the cars are identifiable as taxis,” says Patrick Nyirishema, the Director General of RURA.

And why are VW cabs not painted? No one has an answer.

The painting is not the only matter stirring up dust in the market. VW does not pay parking fees in the same spaces where the private taxis park.

Infact, VW cabs park anywhere they want and are never fined.

The regulator says they held a meeting with all the Presidents of the various taxi cab cooperatives over the matter.

“I asked them to engage the City of Kigali for special arrangements for parking within the city and if they needed RURA’s help, they let us know,” Nyirishema says, adding that he hasn’t heard from them yet.

Meanwhile, parking in designated locations, they say, prohibits them from enjoying similar advantages as VW cabs that enjoy parking anywhere in close range with busy traffic to get passengers.

“We have encouraged them to spread all over the city,” says Nyirishema, contrary to what the taxi drivers claim.

However, Olivier Gatete, who is considering quitting the profession, insists that is not true. “If they say we are free to park anywhere, why do they slap us with fines when they find a cab parked in a non-designated space?”

Strangely, the regulator says, “there is no written rule to park on those spaces.”

The question is, who is fooling who? That remains a puzzle.

A more complex argument is on the use of digital platforms, particularly for collecting fares.

Move accepts both cash and digital payment modes. When the App is down, drivers can still carry a passenger and accept a cash payment calculated per kilometer on the dashboard or through a call-in at the headquarters.

Yego on the other hand, accepts cash and mobile money payments even without a smartphone, app or internet. The Yego meter also calculates the fare based on the actual distance travelled and charges at the rate prescribed by RURA.

The use of meters by all Taxi Cabs has been compulsory for many years.

Earlier, the Taxi Cabs had substandard meters that did not work. Taarifa learned they had been secured from low key Chines manufacturer.

The Yego solution is more intelligent and connected to the fare meter, freely installed in cabs with a free monthly data bundle to ensure that the meters are always working.

Similarly to Move, Yego runs a 24/7 Call Centre that processes around 500 ride requests per day. Move does not share detailed information on their operations, so, we have no comparison to make.

The Taxi Cabs under Yego have exceeded 832,000 rides, with 1,100 active cab drivers. Move has registered 30,000 with 250 drivers. Both are from 2018.

Like one calls 1010 for Move, passengers can too call a tollfree number 9191 and a Taxi usually arrives in a few minutes. The Call Centre agents speak English, Kinyarwanda, French and Swahili and handhold the passengers when language issues arise.

Why is all this important?

For these cabs to run on a meter, it helps to curtail fraud, and overcharging, which continues to be a challenge for foreign visitors, those who cannot speak Kinyarwanda or other Rwandans.

That aside, on a positive note, the entry of VW has spiced up the profession. This is good for the industry.

Move drivers are generally professional, trained to handle passengers with care and sophistication. Passengers also like the brand-new VW cars.

VW Mobility Solution CEO, Rugwizangoga says the company is recruiting young professionals, particularly female.

“If you know any female interested, please tell them to come and join us,” she told guests during the launch of the new electric car.

When passengers felt safe with Move, Yego introduced a similar App, but more robust with dozens of features beyond just booking a ride.

Karanvir Singh, CEO of Yego Innovision Ltd., says the company’s entry into the Taxi cab market was after detailed discussions with RURA, on how to protect the livelihood of the 2,500 Taxi Cab owners and Taxi Drivers in Kigali who are directly dependent on the industry.

Without the App, Call Centre and Digital Meters, the independent Taxi cab industry would stand no chance against a large company like VW.

As a result, with Yego, the industry that was previously characterized by outdated practices such as negotiations for the fare and abandoning passengers on the street or overcharging them, has finally been digitized and professionalized.

“So, 100% taxi cabs in Kigali are powered by Yego. But there is portion of them who are not happy, and this is a mindset issue. They don’t want to learn or upgrade their skills. Our App was ready in December 2018 and we spent nine months training drivers on how to accept rides and how to navigate. Each additional ride brings them additional revenue, however even after ten months, a large number of the Taxi Drivers still call the passenger and ask for directions instead of using the navigation on the meter,” Singh says.

Even with the trainings, some Move drivers can’t use a navigation system.

Forced implementation?

Meanwhile, the fact that RURA forced the Taxi Cabs to use meters, although it was good move in the right direction, it has induced disdain and disapproval with some drivers.

“They treat us like pets…you know the pet owner decides what it should eat, when and from where,” says Dieudonne a disgruntled Taxi Driver.

While RURA had multiple consultative meeting and went through an extensive sensitization process, the fact that RURA forced the drivers to transition to the new meters because their authorizations were expiring and they were told they had to join or they would not get an authorization, has left a negative impression on some of the drivers.

In broad context, meter usage is fantastic in addition to a robust platform. Meters don’t tell lies. They store and show everything.

This is good for everyone, the regulator, security and drivers too.

Each driver’s data and vehicle performance can be seen in real-time, or for yesterday, or the history from a year ago.

“The data that we collect on all the trips, hours and days worked, kilometers driven help us create credit rating for the drivers. Now for the first time the drivers can go to a bank and get a loan.”

This is good for drivers. They concur too.

All drivers are aware of the benefits of the Yego meter, platform and App.

Still, quite a few drivers complained about the fine of Rwf 200,000 whenever they are caught not using a meter.

But then this seems again to be a mindset issue by drivers who deliberately refuse to use the meter. Imagine complaining about paying Rwf 150,000 and spending nights in jail because they were driving drunk.What is illegal needs to be punished, however the Rwf 200,000 fine may be a bit excessive, they say.

Competitive advantage

Most of the licensed taxis on the streets are old, some as old as 30 years.

These vehicles pollute the environment and consume almost triple the fuel of a brand-new VW.

This means that the independent drivers earn much less and would find it difficult to upgrade to a new car.

We are informed that Yego is in discussions with major vehicle manufacturers to bring in brand new petrol cars and even electric cars.

The challenge is that with the high import duty and taxes compounded by the low fares, means that the loan payback period would exceed eight years.

A VW Polo can earn up to Rwf3 million per month as opposed to old Toyotas mainly driven by individual taxi drivers who can earn about Rwf1.5 million per month.

The big difference is that even though VW earns twice as much as the individual Taxi Driver, they pay their drivers Rwf150,000, according to their drivers.

A driver on the Yego platform can earn Rwf 1.5million and take home Rwf 600,000 after expenses, including a 10% fee for Yego.

All independent taxi drivers are considering acquiring better cars to offer comfort and excellent service, but the high taxes make the new cars unaffordable.

Even if they buy a new car, they would still need to survive, to put food on the table and take their children to school, before they can pay the bank the monthly installment.

Policy maker seem to be focused much on advancing smart transport and entering into a futuristic an eco-friendly system.

This, the taxi drivers say, is good and many happy to be part of.

“It is our country, we want to be part of that direction, unfortunately we can’t triple jump, that’s the reality,” says Gatete who has just fully owned a car he purchased on a loan.

They are suggesting that, through engagement with government, an investor should be allowed to, for example, secure similar incentives as VW, such as import duty waivers and tax exemption on new cars.

RURA’s Nyirishema told Taarifa last week that some discussions have been held about some arrangements. “We have discussed with taxi cabs and Yego about newer vehicles, and it’s in the process.”

Drivers say they are skeptical, only hoping that the government would intervene with tax cuts.

A new petrol car costs about Rwf 16.5 million, while an EV would cost Rwf 33 million before duty and taxes.

Rushing headlong into large scale deployment of electric vehicles would bring up serious infrastructure challenges, not just of putting in the charging stations, but getting the grid to support the high power requirements and finding secure places to park fleet for off-peak charging.

Most developed countries plan for a 5-10-year transition period from petrol to electric cars.

Siemens says it has conducted a robust study and concluded that Kigali’s power grid can handle a couple of charging stations at best. However, with the e-golf cars, they will only be charged at the assembling plant at the Special Economic Zone.

An e-golf requires 50kW to charge in one hour. Even a slow charging requires 11kW for 5 hours. It is only known to VW what will happen when they add 20 more e-golf cars.

Meanwhile, some drivers wished that VW sells them cars, but no thanks, VW isn’t considering such a deal.

According to Rugwizangoga, VW’s main focus is selling rides, and not selling cars because, “a certain percentage of customers will be able to purchase a brand new car, but not the majority of Rwandans can walk into our store and buy a new car.”

The company’s model is to offer the same range of cars in a mobility space and pay for what you need, there is the secret, there is the potential,” she said. VW won’t sell the same car they use for their mobility solution.

This is not only a business sense, but it is actually the company’s future business model in Africa.

VW, even having been criticized for alienating Africans as poor people who can’t afford their cars, as reported in many publications in different parts of Africa, it’s plan is to manufacture cars partly for sell but largely for running its mobility concept on the continent.

The next generation of young Africans do not want to own cars, they want to be mobile, says Andile Dilamini, Group Head of Communications. “In order to be mobile, they want access to any kind of car that can take them from point A to point B.”

And Rwanda is now its testing ground for this concept. The company is aggressively pushing its nerves to study, assess and craft a perfect and long lasting business model. Rwanda is serving as a lab or call it a Guinea Pig where once the company masters its concept and crafting a solid model, it will divert most of its energies into other large and more profitable markets such as Nigeria, Ethiopia, Ghana and South Africa or elsewhere.

Analysts say this is a good thing in a broad sense, but Rwanda should be careful. They say VW’s intentions must be treated with caution because the concept could fail, and there is no guarantee of its success.

Concepts come and fail or succeed, they say.

Meanwhile Singh says that Yego has plans for innovative electric cars, but preferred not to provide more details at this stage. “There are many sensible options that fit between a Bus, Car and Moto and Yego intends to bring in something completely new.”

“I wish for VW to succeed, frankly, but this should not come at the expense of the lives of thousands of local people,” says a transport expert who preferred not to be mentioned.

President Kagame, a proponent of smart cities, innovation and technology, would like to strike a balance in this wave of disruption and technological advances.

“Smart cities are about people, not computers. The mission is not to invest in technology for the sake of it, but to do so strategically to make life measurably better for the people who live in our cities,” he said on October 30 during the Qatar Information Technology Conference and Exhibition.


The story has been edited, with additional information and corrections.