Uber’s Betting on Cheaper Cars for Fivefold Growth in Lagos


Uber Technologies Inc. is negotiating cheaper deals for new vehicles with Kia Motors Corp. to boost its number of drivers fivefold in the Nigerian city of Lagos, Africa’s biggest, to 3,000 by the end of next year.

The U.S. car-booking company has signed agreements with the South Korean carmaker and Lagos-based Access Bank Plc to reduce the down payment required for new vehicles to 95,000 naira ($477) from almost 200,000 naira, with the balance payable over four years, Alon Lits, Uber’s general manager for sub-Saharan Africa, said in an interview in Lagos on Aug. 28.

“Since we launched in Lagos just over a year ago, more than 600 job opportunities have been created using the application,” Lits said. “That’s really just the beginning. We feel that the number can be well over 3,000 by the end of 2016.”

MAP: Nigeria
MAP: Nigeria

Uber, which connects drivers with passengers via its smartphone application in more than 300 cities, is seeking partnerships that will reduce costs for new drivers as the San Francisco-based company expands in Africa, Lits said. Founded in 2009, Uber doesn’t own vehicles or employ drivers, and existing taxi companies in cities including Paris, Moscow and Johannesburg have protested at what they consider to be unfair competition.

Poor Mapping

Challenges facing Uber in Lagos, the first sub-Saharan African city to have the service outside South Africa, include congested traffic and poor mapping quality, according to Lits. Another is that a relatively small proportion of Nigerians know how to operate a smartphone well enough to manage the trips, Ebi Atawodi, general manager for Uber Lagos, said in the same interview.

“The smartphone module is usually what trumps people,” Atawodi said. While Nigerian active mobile-phone subscriptions rose about 14 percent to 148.5 million in the year ending July, according to the Nigerian Communications Communication, fewer than 10 percent are for smartphones, or Internet-enabled devices. Nigeria is Africa’s most populous country with more than 170 million people, of which about 21 million live in Lagos.

To address the issue of mapping, Uber is working with other technology companies on ways to direct drivers without access to conventional directions, Lits said. In the Kenyan capital of Nairobi, Uber is carrying out tests with a local company that is developing ways to send pictures of locations, rather than just addresses.

“Unlike in more developed markets, you often don’t have an address where the driver will be able to get turn-by-turn directions,” Lits said.

‘Huge Opportunity’

Uber’s growth in Lagos can match the speed of take-up in South Africa, according to Lits. The company’s drivers in Africa’s most industrialized economy have taken passengers on more than 2 million journeys this year, compared with about 1 million in 2014, the company said in July.

Besides Johannesburg, the company also operates in Durban and Cape Town. Lits sees the number of South African drivers growing to about 15,000 by the beginning of 2017 from 2,000 now.

“Lagos is three times the size of greater Johannesburg,” he said, referring to its population. “It’s a huge opportunity here.”

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