Prospects and investment challenges are evident for VCs and financial institutions to meet demand for >50% of all motorcycle sales, says Cleantech Group
SAN FRANCISCO, CA — June 11, 2024 — Significant opportunities for venture investment exist across Africa for the rapidly growing electric two and three-wheeler (E2&3W) market. But several demand-side and supply-side drivers and barriers to growth clearly need to be addressed, with various countries and exciting innovation creating a path, according to Cleantech Group.
The number of all motorcycles in Sub-Saharan Africa has skyrocketed from less than 5 million in 2010 to over 27 million in 2022. While the current estimated number of E2&3W in Africa is in the low tens of thousands, it is expected to rise to at least 50% of all motorcycle sales by 2040. This surge in demand for E2&3W is primarily driven by the lower operational and fueling costs for fleets and riders.
According to Cleantech Group, up to 80-90% of motorcycles in Africa are used for commercial purposes such as taxis, delivery, and other applications. The percentage of individual ownership (B2C) versus fleet ownership (B2B) varies from country to country. The two main charging business models identified are:
- Outright/complete vehicle sale or lease
- Vehicle sale or lease excluding battery with additional battery swapping services
The exponential growth of E2&3W is not only creating direct economic opportunities but also generating indirect employment. Commercial use of E2&3W is estimated to be one of the largest employment sources in several African countries, with as many as 60% of riders being below 35 years old.
This trend is tackling the youth unemployment challenges faced by many African nations. Additionally, the E2&3W market is creating auxiliary jobs in garages (repairs, parts), financing (asset financing, green loans), sales, and charging infrastructure.
Cleantech Group published a comprehensive stakeholder map, identifying key innovators, investors, and development finance institutions across six African countries: Kenya, Nigeria, Ghana, Rwanda, Tanzania, and Senegal.
“Africa’s electric two and three-wheeler market presents a tremendous opportunity for venture investment and sustainable economic growth,” said Noah Ross, Senior Consultant at Cleantech Group. “The most significant innovation is battery swapping, which addresses barriers around price and electricity access, but other key innovations include vehicle design and ownership models, adapting requirements to African context.”
Key findings from the research:
- Demand-side drivers for E2&3W adoption in Africa include the total cost of ownership reaching parity with ICE (internal combustion engine) two and three-wheelers, increased profits for riders and fleets, and the demand for locally suitable products.
- Demand-side barriers to growth persist, such as the high upfront cost of EVs, lack of buyer incentives, range concerns, and limited charging infrastructure.
- Supply-side drivers are many, such as tax reductions for locally assembled EVs, lower energy tariffs for electric mobility, and the estimated 30 million motorcycle taxi and delivery riders in Africa representing a significant customer base.
- Supply-side challenges include the lack of financing, especially from equity investors, skill gaps around operations, maintenance, and repair of EVs, and policy bans on two-wheel taxis in some countries.
The recent report, “The Rise of Two and Three-Wheelers in Africa: An Analysis of Six Countries,” was sponsored by Factor E Ventures and is now available for complimentary download.
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