Buying a new car in many African countries requires buyers to pay the full cost at once not a feasible option for people in low and middle-income brackets or make do with highly unfavorable car loan terms from banks in the few instances where such loans are accessible. Car ownership is therefore an elusive dream for many on the continent.
Africa accounts for only 1% of new car sales in the world, according to Mordor Intelligence, a research firm. To solve part of this problem, Moove a car financing company started a pilot in Lagos, Nigeria in 2020.
It has a credit-scoring system that can be plugged into ride-hailing and logistics platforms. With this, Moove can know how well a prospective borrower performs on metrics like the number of rides completed and how much they make, using the information as the basis for offering a car loan within five days.
After launching in four other cities across Ghana and South Africa, Moove has now secured $23 million in a Series A round to extend this and other services to the rest of the continent.
A strategic Uber partner in a rising industry
Moove operates in an emerging car financing industry in Africa that includes Planet24, a company based in South Africa that raised $10 million last year. In Nigeria, Autochek and Jiji (which acquired Cars45) are the main players.
These four are similar in that their overall aim is to offer cars to people who want to pay in installments, but one strategy currently differentiates Moove.
In July 2020, Moove became Uber’s exclusive partner in sub-Saharan Africa for vehicle financing and supply. In announcing the deal, Uber described it as “the largest partnership of its kind” and makes the startup a fleet manager in the 7 countries and 41 cities where Uber operates. It points to Moove’s impressive scale and growth in the industry. Moove was founded in 2019 by Ladi Delano and Jide Odunsi, two Nigerians who run other businesses including a chain of clinics and pharmacies.
Moove’s pitch to prospective drivers is to finance up to 95% of the price of a new car. Borrowers can repay over 24, 36, or 48 months using a percentage of their weekly revenue. Moove offers loans for five car brands: Hyundai, Kia, Volkswagen, Toyota, and Suzuki.
To ensure repayment, the borrower is required to sign up to the Moove app where the company deducts weekly repayments directly from the driver’s Uber income and transfers the balance to the driver’s bank account. In an email, the company said the service is currently only for Uber but that similar products for other platforms will be launched later this year. There is a future probability of using the app to give drivers access to future financial products like insurance.
Cars financed through Moove have completed 850,000 Uber trips covering over 13 million kilometers in Africa, the company said. Its long-term goals include ensuring that 50% of customers are women and that 60% of the vehicles it finances are electric or hybrids. The latter will kick off this year, the company said.
“It is an amazing way for newer, more energy-efficient cars to get into the market,” Iyinoluwa Aboyeji, general partner at Future Africa, a Nigeria-based investment firm that backed Moove in December 2019, told Quartz Africa.
For him, Moove can extend urbanization into rural areas by driving alternatives to inefficient public transportation systems. He sees the startup playing a role in a personal project – a charter city for tech entrepreneurship called “Talent City” that is set to open in 2023.
Moove’s Series A was led by Speedinvest, a European venture capital fund for early-stage companies, and Left Lane Capital, a New York firm. Thirteen other firms—a mix of Africa-based and first-time US investors—got in on the deal. In an email, a representative for the startup also said it has raised $40 million in debt financing comprising $20 million from the International Finance Corporation, $20 million from Emso Capital, an asset management company, with remaining commitments ($60 million) arranged by Emso.
Riding the wave of growth in the African car market
Moove and its competitors are rising at a time when car manufacturers are taking an interesting look at Africa. In August 2020, Volkswagen unveiled its first assembly plant in Ghana to add to its other facilities in Kenya, Nigeria, and Rwanda. One pre-pandemic estimate expects Africa’s automotive market to be valued at $39.87 billion by 2026.
In 2019, 17 million vehicles were sold in the US but a little over 1 million vehicles were sold in Africa, arguably a very low return for a continent of 1 billion people. Financiers see an opportunity to match an increased willingness to supply cars with demand gaps on the continent.
An earlier version of this article mistakenly mentioned Moove having 19,000 drivers. Moove currently has 12,900 sign-ups.