Are Electric Vehicles The Next Big Growth Market In Africa?

Written by Tom Jackson

 

Investment into African tech continues to increase, and there is potential for electric vehicles to be the next substantial growth market on the continent.

Back in May, Loïc Amado, Uber’s general manager for East Africa, gave a keynote address at the East Africa Com conference in Nairobi.

While Amado spent time talking up his company’s contribution to the ease of mobility in cities across the world, and what impact his company’s data could have on city planning in future, what really caught the audience’s attention was his mention of electric cars.

Yes, Uber has big plans for electric vehicles in future. Tesla is also making waves in the space. But what was really of note was that this was an Uber boss talking about such things in Africa, surely the market where this trend will catch on last.

Or maybe not, because Africa may actually be the place where electric vehicles are needed most. The continent is urbanizing faster than any other, with this growing urban population straining existing infrastructure. Fuel is expensive and limited, and also causes pollution. With their ability to reduce fuel dependency, electric vehicles could have a huge impact on African cities and economies.

Tesla is one of the leading companies producing electric vehicles. Photo - AP - David Zalubowski
Tesla is one of the leading companies producing electric vehicles. Photo – AP – David Zalubowski

As yet, however, there is no real electric vehicle market on the continent. Uber has talked the talk but is not yet walking the walk in Africa. There is no local Tesla equivalent. Leading the way, in fact, is a newly-formed Rwandan startup.

Ampersand has begun trialling electric motorcycle taxis (e-motos) in Kigali following 2.5 years of research and development. Its initial trials show the e-motos have an average 40 mile range per charge and can hit speeds of around 50 mph, outperforming incumbent 125cc petrol bikes.

“Most people think that the first electric vehicles that are simply better and cheaper than a mass-market, mainstream conventional vehicle will probably be an electric sedan, sold in the West or Japan,” said Ampersand CEO Josh Whale.

“But we realized that that’s not where electric vehicles make the most economic sense first. The first ‘tipping point’ will come about somewhere with many drivers, densely concentrated, covering big distances each day, spending a lot on expensive fuel in the process, and wearing their vehicles out quickly.”

In Kigali, there are as many as 30,000 motorcycle taxis operating within a 7.5 mile radius. Around 60 percent of all the vehicles on the road in Rwanda are motorcycle taxis. Moto drivers spend around $1,800 each year on fuel, while their bikes have short lifespans. This hits drivers’ profits.

“It doesn’t really get more mass market than that,” Whale said.

“Part of the attraction to East Africa is the whole “leapfrog” narrative, and that “pay as you go” electric motorcycles could be the next leapfrog revolution here.”

Electric vehicles provide many benefits for Africa

So what are the potential benefits of electric vehicles? There are obvious environmental ones, such as a reduction in greenhouse gases and air pollution, but that is not all.

Rebekah Shirley is research director at the non-profit advocacy organization Power for All, and a research affiliate at the Renewable and Appropriate Energy Laboratory at Berkeley. She says there is huge potential for electric vehicles to help African countries achieve greater energy security by protecting consumers from volatility and supporting more sustainable power generation.

“Fuel volatility is on the rise, and a switch to electric vehicles helps consumers reduce dependence on such a volatile and expensive resource. At the same time, a strong electric vehicle fleet is a new source of demand for power while many African countries need to stimulate demand to bring down the cost of expensive generation investments,” she said.

“Thirdly, since electric vehicles are mobile storage and since their charge profiles often match those of renewable resources, like solar which is strong in the middle of the day, or wind which is strong at night, electric vehicles can actually help increase penetration of renewables on to the grid, again helping to making African power cheaper, cleaner and more local.”

Meanwhile, there are also immediate benefits to drivers. Whale estimates Ampersand will save drivers $1,100 on fuel and oil changes annually. At a macro level, they can reduce a country’s spending on fuel imports, and thus reduce national balance of payments deficits.

Globally, the electric vehicle market is growing exponentially, with over one million vehicles sold, and experts predicting that, by 2040, 35 percent of new car sales globally will be electric.

“So the industry is no longer early-stage, but there is little market penetration in Africa thus far,” Shirley said.

So little, in fact, that Ampersand, which has not even sold a motorcycle yet, is at the forefront of things. Little infrastructure for electric vehicles exists across the continent. There are very few government policies and no incentives. Whale is optimistic about the Rwandan government, which is assessing how it can best develop electric vehicles, but says there are other factors too.

“Many of the investors and funders that do impact investing in Africa are siloed to investing in certain sectors: agriculture, access to energy, access to clean water, and health. Mobility has by far attracted the most investment in Silicon Valley in recent years, but that trend hasn’t arrived here yet,” he said.

It surely will, however. As investment into African tech increases year-on-year, there is potential for electric vehicles to have a positive impact on the continent while making money. Watch this space.

Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.

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