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Financial solvency biggest challenge in Egypt’s smart transport market - Daily News Egypt

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Financial solvency biggest challenge in Egypt’s smart transport market

Egypt's smart transport market can absorb more investors due to its large size: OKA Truck


After the Egyptian Competition Authority (ECA) had approved the merger deal of ride-hailing companies Uber and Careem last month, the resulted entity became too strong to compete against in Egypt’s smart transport market. So, would be there any chance for new companies to enter the market?

Khaled Ismail, founder and chairperson of HIMangel angel fund for early-stage firms, said such merger deals of main market players would impede the entry of new companies of any size, especially as Uber is one of the world’s largest ride-hailing service providers. After acquiring its main competitor in the region, it will become even more powerful.

Ismail added there are other companies operating in the market, but an entity the size of Uber and Careem makes it difficult for them to compete, given the new investors’ need to pump large investments in the beginning.

Moreover, Mohammad Hussein, CEO and co-founder of OKA Truck, said Egypt’s smart transport market can absorb more investors. The market is big and has more than 100m people in 27 governorates, and most of them need smart transport services.

He added that the Uber’s and Cream’s service quality declined recently, but there were no suitable alternatives, making options limited for the user. This represents an investment opportunity for any company that works in this field. Especially as the two companies’ promotions for their customers disappeared, which reduced competition between the two sides and supported the decline of the service quality.

Hussein believes that any new company that offers the same services as Uber and Careem will be able to acquire an appropriate market share, provided that some incentives are offered to drivers and passengers.

He added that providing a fixed salary and health insurance for drivers can represent a competitive advantage for Uber and Careem. It also provides an approved vehicle maintenance facility for the company to replace drivers’ old vehicles with new ones.

Hisham Abdel Ghaffar, founding partner and executive vice president of venture capital company Menagurus, said the smart transport market became in the grip of one market player after the latest acquisition, which would not be in the consumer’s interest. The market in its present form is monopolised by a single service provider, pointing out that transport is an important service that directly affects a wide range of citizens.

There should be other strong competitors locally and regionally, especially that Egypt has one of the biggest markets in the region, with strong potential for growth. Egypt could be a start to the regional market after the merger of Egyptian branches of Uber and Careem.

Abdel Ghaffar believes that Uber’s strong financial solvency and presence in the region make the emergence of a new competitor very costly, with large investments needed to keep pace with Uber.

He believes the market is facing two possible changes. First, huge investments made by regional investors in SWVL company to expand its product base to include transportation by private cars, making it a strong competitor. The company is expected to attract large investments due to its strong performance and expansion in markets. In addition, there are investors with experience in investing in smart transport and solvency after leaving Careem, such as Al Tayyar group and other regional investors.

Another possibility is the emergence of a national service provider supported by investments from government agencies, especially that collaborative transport activities have become officially regulated and controls and commitments have been established for operators by the Council of Ministers.

Uber said in a press statement after the conclusion of the deal that it would lead to unifying the efforts of Uber and Careem in offering exceptional services for everyone, whether passengers or drivers, across Egypt.

Through cooperation and the gathering of strengths from both sides, the two companies aim to offer more benefits to passengers, drivers, and the economy on a wider scale, Uber said.

Emad Reda, CEO of GoBy for ride-hailing, said Uber was one of the largest entities in the transport market, but after its merger with Careem, it became almost the only provider of ride-hailing services.

Reda saw that Uber’s capabilities gave it the chance to monopolise the market in the absence of a competitor with the same strength and financial solvency. He pointed out that the service pricing is now in the hands of one company, which almost eliminates competition.

We aim to expand in the hope of increasing our competitiveness. We launched our services without a commission from the driver, he said. “Our service tariff is also lower than other competitors’,” he added.

Noteworthy, Dubci, newly created local ride-sharing company, declared last Thursday it will launch its services within a few weeks.

Dubci added it contracted with the Ministry of Interior to check the cars before contracting within the framework of the company’s cooperation deal with the Police Officers’ Insurance Fund, according to the statement.

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https://wwww.dailynewssegypt.com/2020/01/24/financial-solvency-biggest-challenge-in-egypts-smart-transport-market/
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