The second-hand vehicle business seem to offer a stiff competition to the new car business globally. Africa and Ghana however have it in another level. How can a car manufacturing company make it in such a terrain? Volkswagen (VW) is pushing further.
Volkswagen intends to set up a car assembling plant in Ghana. This is expected to offer employment opportunities and enhancement of local technical capacity. There is no certainty however with how far this has progressed. VW in Africa has already materialized in Rwanda with a $20 million facility that assembles vehicles in the city of Kigali.
VW Ride-Hailing Venture
The VW assembling plant in Africa is welcoming but a rather interesting development is VW’s plan to venture into ride-hailing services in Africa. The pilot has already began in Rwanda. Out of an unfavourable situation of low demand for new cars, the company is venturing into the ride-hailing and car-sharing. It has budgeted about $50 million to develop the complementing business. Kigali has been selected as the piloting ground for the African project.
A similar development may happen in Ghana which has also been slated for the establishment of an assembling plant. Implying a VW ride-hailing in Ghana may be imminent.
The Move vrs UBER & BOLT
Industry analysts are however skeptical about VW’s ride-hailing service ‘MOVE’ to overtake the market leaders Uber and BOLT. So far VW’s figures are a bit on the low side. The service launched in Kigali in December 2018 had only achieved 2,200 active users as at July 2019. This is out of 850,000 Kigali city dwellers. Though low in starting out, the VW African boss Thomas Schaefer seem to know what he is about. He intends to deploy a vertical adaptation and expansion strategy to the VW African business, which is highly innovative. They would create the vehicles and let them out for ride-hailing services instead of waiting for buyers of new cars.
What may work for VW in a country like Ghana is for VW to build small low budget vehicles similar to Kia Picanto and Kia Morning and give it out on hire purchase. The system currently called work-and-pay in the local circles could be adapted on an upmarket basis. This could see unemployed graduates hiking up to it and driving the VW’s ride-hailing venture.
UBER and BOLT have achieved some market dominance in Ghana and Africa, there is still vast opportunities for growth due to the coverage of the services and the prevalence of smart phones and of course the high unemployment rate. A latest kid YANGO also introduced its services to Ghana but only operates in Accra for now.
There is more room for a market-sensitive ride-hailing service to also clinch a good chunk of the market. And of course being the manufacturers, they also stand to gain from the parts and service side of the auto business. However their highest competing chip would be on price and volume business. Can VW rise up to that?