German automaker Volkswagen is expanding in Africa, hoping to open an auto assembly plant in Rwanda and pilot ride-hailing and car sharing services in the capital, Kigali. Europe’s largest automaker, VW is counting on new revenue sources such as pay-per-use transportation to increase business in countries with poor transport infrastructure — especially countries where Uber does not yet have a presence.
VW also announced that it has resumed auto assembly in Kenya after four decades. VW’s move into “app-based integrated mobility” in Rwanda is significant for two reasons: It is happening in a city in Africa and it is a new business model for future urban mobility. Emerging markets with poor transportation links have become a battleground for establishing new mobility services. Rwanda is a good market for VW because there is little competition there.
“Volkswagen wants to strengthen its presence in emerging markets. That is why Africa ranks high on our agenda,” said Volkswagen brand Chief Herbert Diess.
The German auto company said it might use electric versions of the VW Golf in the Rwandan mobility services business after the completion of its market research in Rwanda by May, said Thomas Schäfer, CEO of Volkswagen South Africa, at a Kigali press conference. An assembly plant could be set up in Kigali by the end of 2017 that produces at least 5,000 vehicles a year. Volkswagen South Africa is leading the initiative in Rwanda together with Volkswagen’s Kenyan partner, DT Dobie.
Africa is the final frontier for the global automotive industry with enormous growth potential, according to Deloitte. Vehicle sales are expected to grow by 40% within the next five years on the continent, according to VW as brand new vehicle ownership is relatively low in Africa with 44 vehicles per 1,000 inhabitants compared to a global average of 180 vehicles per 1,000 inhabitants.
The company came up with a pilot project that will involve a company owning vehicles and allowing customers to pick them up in one point and drop them off in another — like similar systems in Berlin, London and Paris.
“We will make passenger vehicles not only available for the market to buy but also for the shared service that now is increasingly becoming the trend in many cities of the world,” said Francis Gatare, CEO of the Rwanda Development Board.