South Africa’s e-hailing industry is expected to reach a value of R7 billion by 2028, and high car prices are a big contributor to the sector’s rapid growth.
As the gap between the average salary and the window sticker of a new car continues to grow, many road users are instead switching to e-hailing apps like Bolt and Uber to get where they need to go.
As one industry declines, another takes its place
TransUnion’s most recent quarterly report on the state of South Africa’s automotive industry highlighted several ways in which consumers are being hampered by ever-rising costs, which is driving many to take on significant debts, downsize their purchases, or seek alternative forms of transport entirely.
Nearly 75% of all the vehicles sold in South Africa now cost more than half a million rand, which is forcing the average motorist to take out a loan in excess of R390,000 to afford a new set of wheels.
Alternatively, many households are choosing to downsize the number of vehicles in their garage, going from two models to one multi-purpose option like an SUV to minimize the cost of ownership, including fuel, insurance, and maintenance.
Naamsa’s monthly vehicle sales reports tell a similar story, as the industry has been experiencing a near-constant year-on-year decline in purchases over the last two years.
All of this has been good news for ride-sharing services, which exploded in popularity in recent years owing to the state of the local auto market.
Citizens who cannot afford their own vehicle now rely on these apps as their primary means of getting around, and households are also calling on Bolt or Uber more frequently to transport family members when the only car is already in use elsewhere.
According to Vincent Lilane, business development representative at inDrive, e-hailing has had a dramatic effect on urban mobility in South Africa, as roughly 21% of the population now use these apps as an alternate form of transport, wrote Daily Investor.
The local ride-hailing sector is projected to reach a value of $387.70 million (R7.12 billion) by 2028, serving an estimated 14.38 million users.
What Uber and Bolt’s success means for South Africa
There are currently very few regulations governing how e-hailing services operate in South Africa, though this is expected to change in the near future.
The National Land Transport Act was recently amended to give the Minister of Transport limited powers to set the rates for apps like Bolt and Uber, something that was previously left up to the platforms.
While the industry as a whole is estimated to be worth billions of rands, the average driver actually earns very little as most of their revenue is eaten up by operating costs.
“The sad reality is that South African drivers tend to earn less than minimum wage. This is because their earnings are eroded by rising fuel prices, vehicle rental fees, the elimination of incentives and bonuses and increased commissions for each transaction,” said Lilane.
The proposed changes to the pricing structure of these apps could benefit not only the driver, but also the passengers, as it may be possible for the former to operate at a more enticing rate.
“This would allow them [the passengers] to access more competitive fares, a critical factor during the current cost-of-living crisis where affordable transportation is a major concern,” explained Lilane.
Another challenge the industry faces in South Africa is safety, as both the riders and drivers are a common target for criminal activity.
Bolt recently announced that it had blocked 6,000 drivers from its platform in six months due to non-compliance and safety matters.
There have been several high-profile cases involving drivers who have assaulted their passengers, including one in Cape Town where a Bolt operator allegedly stabbed two women after refusing to drop them off at their requested location.
Drivers are also frequently targeted by thieves as they are considered an easy mark, which has led to suggestions that these apps go cash-less to improve safety.
These conditions have prompted Bolt and Uber drivers to go on strike on multiple provinces within the last year, and strikes like these are likely to further impact urban mobility as e-hailing apps continue to grow as the main form of transport for many people.
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