Bocconi-Ke Ya Rona-New City Growth

May 21st 2015

Ke Ya Rona meets the world - - - Ke Ya Rona‘s International Expansion PlanKe Ya Rona

Dario Trindler – Minh Huynh– Dorian Meyer – Germana Romano– Sidhanth Madan

In the prior months we have done a through and very practical analysis on what countries and more particularly cities Ke Ya Rona should conquer next regarding its international expansion plans.

The basis of the analysis was a three-step funnel approach that was based on certain quantitative criteria (such as GDP per capita) as well as on subjective judgement. The result of the analysis based on the funnel approach was to build up Ke Ya Rona‘s business in the following four cities:

- New Delhi- Bangalore- Nairobi- Lagos

New Delhi is part of the Indian market which is considered as Uber‘s second biggest market in terms of geographic presence and growth. The chosen cars for New Delhi are Toyota Etios and Toyota Innova mainly due to its higher fuel efficiency.

Bangalore on the other hand shows a very good case for especially Uber Black with Nissan Sunny as main vehicle. The latter is cheaper than other Uber Black car options and therefore easier to finance.

The main reasons for Nairobi were its status as central hub regarding major businesses in East and Central Africa and the continuously increasing smartphone penetration. The target customers are business customers and corporate account sin general who will be served by a Toyota Fielder 2008 as main car of service.

Lagos is particularly interesting due to .its high digital literacy. The target group covers both expats as well as middle-class Nigerians. The car fleet to use will be Toyota Amry and Toyota Avensis.

Future OutlookBangaloreNew DelhiLagosNairobi Funnel

Explanation

Outline of the Presentation

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Executive Summary

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Funnel Approach

New DelhiLagosNairobi Bangalore Recommendat

ion

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Dario

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Minh Dorian Germana Sidhanth

To work for Ke Ya Rona in the context of the CEMS Business Project was a very interesting experience. On the positive side it has been a challenging and very interesting project based on a truly innovative business model and unknown environment. An interesting insight was also that it made me realize that despite of all the new technologies we can use it is not completely easy to organize the work within a team that is spread over different continents

This project was my first choice because I wanted to get insights into the thinking-process of a social start-up company. Soon after the project ignited, I realized that we were given a lot of freedom to decide on how to reach the expected result. This entrepreneurial freedom was quite new to me. I have never worked on a project without guidance. In the end however, I felt that I have learnt a lot about teamwork, risk analysis and especially lean management.

The Ke Ya Rona project was my first choice among all the suggested CEMS Business Projects. Since the beginning I was really exited about working with Ke Ya Rona. This was my first project related to the social business and also the first time within a start-up. My experience within the team has been extremely positive, we were able to create a good work environment, constructive communication and proactive approach.

My intrinsic motivation for this project is to gain further insight into the for-profitable aspect of a social enterprise like Ke Ya Rona. Not only was I empowered by my amazing team during challenging times, I was very happy to receive tremendous support from local experts who believe in the good purpose of Ke Ya Rona, whom I’ve never met in person before. A personal insight: It is extremely important for me that my works have a good purpose.

Entrepreneurship and social enterprises have attracted me throughout my masters and having had the opportunity to work with a project like Ke Ya Rona has been amazing. The one major learning apart from the lean start-up is the importance of my network and how it can be leveraged in the work environment. Secondly, I now truly understand the potential my country holds and this BP has challenged me to create something of my own in the near future.

Team CEMS Ke Ya Rona

Every team member profited in a different way from this project

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Funnel Model OverviewIn order to expand Ke Ya Rona’s business internationally a three-step approach was used to identify and select the most attractive cities

Determination of several regions & listing of all Uber

cities

Analysis of all cities based on given criteria and

determination of 3 best cities per region

Comparison of the best cities per region and selection of the

3-5 most promising cities

Selection of finally 3-5 target cities using a 3-step approach

I. Region Clustering II. Selection of best cities per region

III. Final City Selection

Funnel Approach

Selection of major regions of interest: Africa South-East Asia India Eastern Europe & Middle East South America

Listings of all Uber cities, sorting out those in uninteresting regions (e.g. North America) and allocate the remainder to the regions of interest

Criteria used to investigate all the Uber cities: GDP per capita Unemployment rate Political stability # competitors Smartphone penetration Population

We aimed to find cities that seem attractive for Ke Ya Rona based on the criteria listed above and which therefore resemble Johannesburg

Best cities per region were all listed together and compared

Based on the criteria already used in step 2 Legal issues in the country Uber competitor analysis Quality and quantity of the contact persons’

information

Based on the four different aspects listed above and our own critical and subjective judgement we chose the cities we would recommend Ke Ya Rona to conquer

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Funnel: Step 1In order to start the selection process all Uber cities worldwide were grouped in different geographical regions and only those with similar characteristics as South Africa were considered

I. Region Clustering

Funnel Approach

DIVI

SION

OF

REGI

ONS

Africa Dario

South-East Asia Dorian

India Sid

E. Europe + M. East Minh

South America Germana

AFRICA

NairobiCape TownLagos

Cairo

SOUTH-EAST ASIA

Bali

Bangkok

Hanoi

Ho Chi Minh

Jakarta

Kuala Lumpur

Manila

Phuket

INDIA

BangaloreNew Delhi

Mumbai

ChennaiPune

Hyderabad

EASTERN EUROPE + MIDDLE EAST

Prague

Bucharest

Sofia

Budapest

Tel Aviv

Dammam

BeirutAbu DhabiDoha

SOUTH AMERICA

Rio de Janeiro

Belo HorizonteMedellin

Cali

Sao Paulo

Santiago

Lima

Bogotá

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Funnel: Step IIIn order to find the best cities per region we analysed the situation in all the Uber cities in the respective regions based on six core criteria

II. Selection of best cities per region

Crite

ria GDP per

capitaUnemploymen

t ratePolitical Stability # CompetitorsSmartphone

Penetration Population

Example: Assessment of cities in South-East Asia

Resu

lts p

er

regi

on

Afric

a

Nairobi

Lagos Sout

h-Ea

st

Asia

Johor Bahru

Kuala Lumpur

Sout

h Am

erica

Santiago

Indi

a

New Delhi

Bangalore EE

+ M

iddl

e Ea

st

Dubai

DohaLima

Bogotà

Funnel Approach

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Funnel: Step IIIIn order to find the best cities out of the final 10 cities a mix of a quantitative and qualitative assessment was used which led to New Delhi, Bangalore, Lagos and Nairobi as final cities to target

III. Final City Selection

Matrix of Final Cities to consider

Final result: 4 cities chosen

Six Core CriteriaGDP per capita, Politiical Stability, Smart phone penetration, Population, Competitors, Unemployment rate used to evaluate the cities on a quantitative basis

Legal Issues & ContactsIn addition to the quantitative data, legal issues are seen as crucial for a market entry. Contacts gave us fruitful insights into the markets

LowLow

High

High

LagosLegal issues & contacts

Six

Core

Crit

eria

Nairobi

Determining the Choice IAttractiveness Analysis

I. Six Core criteria: New Delhi is politically stable and it demonstrates a rather higher smartphone penetration. Also, the GDP per capita is increasing. II. Legal issues & contacts:Due to Sidhanth’s multiple contacts we managed to get detailed insights in the whole Indian market including New Delhi. Legal issues are low compared to other Uber cities. Determining the

Choice IIAttractiveness Analysis• I. Six core criteria: Nairobi is a key

business hub in the 4th largest sub-saharian region. Also, smartphone penetration is one of the highest in Africa which makes it to a highly interesting market

II. Legal issues & contatcs:With Marius, Isaac and Ato we had 3 contacts that provided us with very rich insights.

Final Cities to considerNairobi

Bangalore

New Delhi

LagosJohor Bahru

Kuala LumpurSantiago

LimaBogotà

New DelhiBangalore

DubaiDoha

Kuala LumpurNew DelhiBangaloreLagos

Nairobi

SantiagoLima

BogotàJohor Bahru

DubaiDoha

Funnel Approach

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Nairobi

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Mobile payment preferred

over credit card

Higher revenue potential per capita

Financial inclusion only for

middle and upper class

Entrepreneurial mind-set of taxi-

drivers

Key Take-Away

Driver: Starting with 1 Driver Driver Profile: Experienced from taxi companies, who

have a stable customer base, entrepreneurial mindset Customer Target: Business customers, corporate

accounts in general customers with access to credit card, i.e., middle-class -> Aim for Uber for Business

Preferred car: Toyota Fielder 2008

Ke Ya Rona Market Entry Strategy

Uber Update• UberX, Uber for Business•~30 registered members in Nairobi• Rumors: $20mn budget• Restriction: Card Payment• Consider Mpesa intergration, cash• Allowed cars: from 2008

Country Overview• 4th largest Sub-Saharian economy• Nairobi as key business hub in East and Central Africa Corporate business travel retail • High increase in mobile phone penetration (est. >80% of the population) - one of the highest in Africa• Kenya leads the world in mobile payment • Relatively low card penetration: 0.22/capita (38.2 in SA;12.0 in Nigeria)

Competitors

Taxi

Nairobi: Country OverviewBusiness Customer Segment offers the highest potential for UBER

Nairobi

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Main Insight Main Insight Main Insight

Marius Declerck

CEMS NetworksContact: Marius.Declerck

Isaac HunjaUBER Marketing Manager Kenya

Ato Quansah(Former) EasyTaxi Marketing Director Ghana

• Former driver for taxi companies

• Now independent drivers with own fleet (3-5 cars)

• „M-Pesa is the most important payment system in Nairobi“

• „Uber‘s demands are mainly from business customers and upper-middle and middle class“

• „UBER has strong intentions to penetrate the Kenyan taxi-hailing market“

• “Weekend days are no peak-times for taxi drivers, but week days”

• Sparring partner for P&L calculation

• “Uber is definitely aiming at upper-class people as Easy taxi owns the middle-class market”

Main Insight

General Insights Uber Expert Taxi Entrepreneur

Easy Taxi Expert

David & Sam

Nairobi: Expert ContactExperts confirmed local demand for Ke Ya Rona‘s business model, especially in Nairobi

Nairobi

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Local Incorporation Procedure Bank financing for used cars

• Reserve a unique company name • Stamp the memorandum and articles of association, and a statement of the nominal capital• Pay stamp duty at a designated bank• Sign the Declaration of Compliance before a commissioner of oaths• Register with the Registrar of Companies at the Attorney General Chambers• Register for taxes at the Kenya Revenue Authority • Apply for a business permit • Register with the National Social Security Fund• Register with the National Hospital Insurance Fund • Make a company seal Minimum duration: 30 days, cost: 30,000 KSHhttp://www.doingbusiness.org/data/exploreeconomies/kenya/starting-a-business/

• High loan amount of KSH 5M for used cars.• Required minimum downpayment: 20%• Max. Repayment period: 5 years• Financing Package: Vehicle value, cost of

insurance and car tracking device

Tedious application procedures; Financial options from commercial banks are only offered to individuals who can already with higher social status

Nairobi: Legal Affairs

Vehicle Registration

• Documents required by the Kenya Revenue Authority/ Road Transport Department [16]

http://www.kra.go.ke/roadtransport/roadsvehicleregistration.html

• Salaried with a minimum gross salary of KES 75,000 per month

• Salary account with Standard Chartered Bank before the loan is disbursed.

https://www.sc.com/ke/borrow/loans-auto.html

• Introduction letter from employer on company letterhead

• Proof of income (certified copy of pay slip) and last 6 months bank statement (for new accounts)

• Copy of ID / passport• 1 x passport sized photograph for new

customers• PIN certificate• Proforma Invoice

Additional requirements for used vehicles:• Log book• Valuation report• Sale agreement

Feat

ures

Elig

ibilit

yDo

cum

ent r

equi

red

Nairobi

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http://www.doingbusiness.org/data/exploreeconomies/kenya/starting-a-business/









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Car Categories for UberX Recommendation

Revenue of DriverIdentical revenue scheme applied for UberX

Usage in the marketTaxi business requires a strong, durable and stable car

Nairobi: Car models suggestionToyota FIELDER is the best choice within UberX category to target Business Customers

Toyota BELTA Year: 2008Market Popularity √Market price:• 900,000KSh

Attractiveness AnalysisSelf-imported from Japan

Pricing Scheme:- CIF ∑(Cost, Marine Insurance, Freight)- Import Duty: 25% CIF- Excise Duty: 20% ∑(CIF, Import Duty)- VAT: 16% ∑(CIF, Import & Excise Duty)- IDF: 2,25% CIF or 5000KSH, whichever

higher

Purchase from local market

Toyota BELTA

Toyota FIELDER

Toyota ALLION Toyota FIELDER

Year: 2008Market Popularity √Market price:• 1,150,000KSh

Toyota ALLIONYear: 2008Market price:• 1,250,000KSh

970,000 KSH(Calculation based on avg. market price)Duration: 6-12 weeks from Purchase Day1,150,000 KSH(Avg. Market price)Custom paid

Why ToyotaMany taxi operators prefer TOYOTA Models NZE, Corolla, Succeed, Allion and FIELDER as the most popular model.Advantage:• Not expensive• Durable & stable• Easy to maintain & sold• Spare parts readily availbeT oyot a Nissa n Suba ru

85.9

12.5

1.6

Why Toyotay FIELDERToyota FIELDER perceived as higher class than COROLLA with higher market popularity than ALLION More eligible for Uber for Business

Nairobi

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Nairobi: FinancialsEven under the very conservative assumptions of the Base Case, Ke Ya Rona driver’s profit is slightly above local upper salary of taxi drivers

Driver’s Profit per Month (KSH)NormalBase Case

RevenueBooking FeeKe Ya Rona

FuelMaintenance

Driver

150,900 225,00030,180 45,00045,270 67,50030,180 45,00015,000 15,000

30,270 52,500

Assumptions25 work days per month

Per day: 2 airport trip + 3 inner-city trips

Fuel: 20% of revenue

Monthly Revenue Simulation

Revenue Simulation Base (UBER Rate) min

KSH/min (UBER

Rate) kmKSH/km

(UBER) Price/RideRide/Day Monthly

Airport UBER Flat Price 3000 1 75000

Business center: Expathub 100 33 4 13 60 1012 3 75900

Revenue 150900

Feasibility CheckNormal taxi driver monthly income is btw.30,000-40000

KSH

Currency: KSH

Currency: ZAR 3,723 6,458

Base Case

Avg. Price Ride/Day

RevenueMonthly

1500 6 225,000

Normal Case

Insurance: 10% Car Value p.a.

Normal Case6 Avg Rides/Day for 1500KSH/Rides

Base Case

Nairobi

11

Exchange rate KSH/ZAR

0.123

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Normal CaseBase Scenario (Conservative)

Nairobi: Ke Ya Rona expected profitProfitability among all case, higher profit potential for normal case, in particular with a self-imported vehicle from Japan (Common in the market)

Ke Ya Rona Monthly Profit Calculation (KSH)

Principal per VehicleTerm

Monthly Repayment +

Interest

Ke Ya Rona min. income

Repayment * Interest

Min Operating Profit

970,000 1,150,0004 4

22,633 23,958

InsuranceTracker

45,27022,6335,658

45,27026,8336,708

2,460 2,460

14,518 9,268

970,0004

20,208

67,50022,633

5,6582,460

36,748

1,150,0004

23,958

67,50026,8336,7082,460

31,498

Uber Type 2Uber Type 1Uber Type 2Uber Type 1Toyota Fielder Self-

ImportedToyota Fielder from

KenyaToyota Fielder from

KenyaToyota Fielder Self-

Imported

Income Statement per vehicle

Currency: ZAR 1,786 1,140 4,520 3,874

Nairobi

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Lagos

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Government plan: issuing

15m Credit Cards until

2018

The competitor “Easy Taxi” is seen as

local company

20% drop in UBER prices = increase of revenue & demand

Credit-Card penetration in Lagos:

high

Key Take-Away

• We advise Ke Ya Rona to use the existing model to enter the car-financing market in Lagos

• Start with 1-2 Uber X cars to get a feeling for the market

Ke Ya Rona Market Entry Strategy

Competitors• Services: UBER X / UBER Black• UBER X is cheaper than regular taxi services• Rich Nigerian‘s usually have their own chauffeurs• Target group for UBER are expats & as middle-class Nigerians• Expected implementation of “Uberpool” a car-pooling service which aims at reducing traffic jams•Most UBER drivers are employed

Uber Lagos Update

Easy taxi is perceived as local company.

Tranzit charge the driver a flat fee where as Easy Taxi / UBER charges 10-20% of the revenueAccept both, credit-card and cash payments

Lagos: OverviewAfrica’s power house offers Ke Ya Rona growth opportunities, especially in the middle-class market

Lagos

Result: 30% increase in earnings, 23% in demand, more trips, more car utilization

Pricing

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• “Private people have a really hard time to find financing, especially for cars. We are very happy to work with Ke Ya Rona. Currently, most drivers are employed by partners (car hiring companies). It would be great to see more private drivers on the street”

Sola LawalJoseph Fakayode

Insight• “Try to get as less

attention from CAC as possible when entering the market: Hire a professional to handle the bureaucratic stuff”

• “Taxi is this is the main transportation method in Lagos. Public Transport is very weak”

• “Traffic jams are unpredictable and will become worse in future”

• “Every taxi driver wants to become an entrepreneur”

Insight

CEMS Networks UBER Operations Manager

Insight

Entrepreneur UBER Expert Legal AdvisorAdawale Fajana

International Lawyer

Lagos: Expert ContactsAll experts are eager to help Ke Ya Rona to prosper in Nigeria as the business model is perceived as highly fitting for Lagos

Lagos

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Local Incorporation Procedure Car Ownership & Registration

Market entry as “For-Profit-Organization”1. Reserve a unique company name at CAC2. Prepare the requisite incorporation documents / pay

stamp duty 3. Sign declaration of compliance (Form CAC 4) before a

Commissioner for Oaths or notary public 4. Register at the Corporate Affairs Commission / Pay the

fees at the bank desk of CAC 5. Make a company seal 6. Register for income tax and VAT at Federal Inland

Revenue Service 7. Register for personal income tax PAYE at the State Tax

Office 8. Register business premises with the Lagos State

Government and Pay the business premises levy at a designated bank

The CAMA (The Companies and Allied Matters Act 1990) CAMA requires a minimum of two directors and two shareholders to form a company. The directors and shareholders can be of any nationality, and need not be resident of Nigeria.

• Ordinary people cannot register a company by themselves, only lawyers and chartered secretaries are allowed to do this at the CAC in Lagos

• CAC is giving foreign “for-profit” organizations a hard time in terms of staying in line with regulations, bribing (which is a common part of business in Nigeria)

• The incorporation fees cover application forms, stamp duties, incorporation documents and filing

• The owner of the Vehicle has to change ownership of registration with the inspector of Vehicle Offices in Nigeria by law.

• A Compulsory Third-Party Liability (CTPL) insurance is required before the Government agency will approve of the change of ownership.

• This insurance is supposed to compensate the family of any person who will become a casualty of a vehicle accident.

• An inspection report which details the specifics of the vehicle and the corresponding emission test done to check the vehicle is in a good condition before it is permitted to be transferred into the names of the new owner

• Visit federal website at www.nvisng.org and completes online registration (MVA01 form)

• Print the completed form and attach all relevant vehicle documentsProceeds to SBIR/MLA (State Board of Internal Revenue/Motor Licensing Authority) office and collect the allocation of plate number form, Plate number Tag, CMR and information required issued by the police

• Pay for vehicle number plate at SBIR/MLA and collect your vehicle number plate.

• Take your vehicle to Vehicle inspection Office (VIO) for physical inspection and collect a Road worthiness certificate, if VIO is satisfied

• Now go back to Road safety for the verification of documents provided.

• Here, the verified documents are Driver’s License: Insurance Policy Number, Means of Identification, and Proof of Address (e.g. Utility Bill)go back to SBIR/MLA, where you will be given the following registered vehicle documents: Proof of Ownership Certificate (POC) numberProof of Ownership Certificate,Vehicle Number Plate, Vehicle Identification Tag (VIT)

Proc

edur

e

Proc

edur

e/St

ate

of b

eing

Risk

Car

Hire

Tran

sfer

of

owne

rshi

p

Incorporating a company and registering a car is tedious and a bureaucratic challenge

Lagos: Legal Affairs

• A company, which has registered cars in its name and which have the main purpose of transporting people, must obtain a “Car Hiring License”. This license can be obtained at the “Enterprise Development Centre” in Lagos Co

s t Depends on the vehicle. A saloon car is usually between N35k – N45k

Lagos

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Product Attractiveness Matrix

Deeper Offering Analysis

Revenue of DriverInformation taken from interview with Sola – UBER Operations Manager Lagos

Models in the marketUber X: Toyota Camry, Honda Accord, Hyundai ElantraUber black: Toyota Prado, Toyota Avensis,, Ford Escape, Mercedes ML class

Lagos: Car models suggestionToyota are by far the most used cars in the transportation business due to their fuel economy, ruggedness and very low maintenance costs

LowLow

High

High

Uber Rikscha• XXXXXXXXXXXXXX

Uber Black• Toyota Prado

Uber X• Toyota Camry

Usage in market

Reve

nue

for d

river

Uber SUV• XXXXXXXXXXX

Uber Lux• XXXXXXXXX

Determining the Choice IUber X Attractiveness

AnalysisI. Revenue for driver: • Uber assures partners a minimum income of

1250₦ / hr when driving• In the market entry phase, UBER assures

partners to make a minimum of 300’000₦ / month

II. Usage in the market: Fuel economy and ruggednessare the most important features of a taxi car. Honda civic and city are the compact cars with good fuel economy but they are way too fragile. Accords are stronger, but fuel economy and maintenance is higher than Toyota. The Toyota Camry is very rugged, has good ground clearance for bad roads, has a very spacious interior. Parts availability high, a considerate fuel economy. Maintenance is cheap, but a good mechanic must be found. Overall, the Camry is the most efficient car to use in Lagos

Uber Black Attractiveness AnalysisI. Revenue for driver:

• Uber assures Uber Black partners a minimum income of 1750₦/hr

• In the market entry phase, UBER assures partners to make a minimum of 350’000₦ / month

II. Usage in the market: Also here, fuel economy and ruggedness are the most important features of a Uber Black car. Furthermore, the 2008-2014 Toyota Prado models is widly perceived as very safe car. Even tough a Ford Escape or Mercedes ML models seem more luxurious, the maintenance costs are about 10% higher than for Toyota models.Therefore we strongly advise Ke Ya Rona to go for Toyota Prado’ model.

Lagos

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Driver’s Profit per month (in ₦ ) NormalBase Case


FuelMaintenance

Other

Driver(in ZAR)

350,438 450,00070,088 90,000105,131 135,000 70,088 90’00029’203 37’500

75’9284’480

97’5005’753

0 0

Assumptions (price per ride)25 work days per month

Per day trips:2 Airport – Island I 4000₦ / ride3 Airport – Jakanda I 4000₦ /ride1.5 Short city trip I 8km/ 20min I 1345₦ ride

Yearly maintenance cost: 1 driver’s monthly revenueFuel: 20% of Revenue

Revenue Simulation (Conservative)

Base (UBER X) min

NGN/min(UBER Rate) km

NGN/km(UBER Rate) Price/Ride Ride/Day Monthly

AIRPORT--> Islands UBER Flat Rate 4000 2 200000Airport --> Jakande VGC AJAH

UBER Flat Rate4000 1 100000

Short City trips 400 25 9 8 90 1345 1.5 50437.5Monthly Revenue 350’437.5

According to expert: 450’000₦

Normal Case Monthly Revenue

Lagos: Uber X drivers performanceUber X is the most profitable option for Ke Ya Rona to enter Lagos

Lagos

18

Revenue Simulation

NGN/ZAR: 0.059

Exchange Rate

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Lagos: Uber Black drivers performanceUber Black cars are less profitable than Uber X – mainly due to higher demand for UBER X cars

Driver’s Profit per month (in ₦ ) UsualBase Case


FuelMaintenance

Other

425,000 500,000 85,000 100,000

127,500 150,000 106,250 125,000 35’417 41’667

70’8334’179

83’3334’917

Assumptions (price per ride)

25 work days per month

Revenue Simulation

0 0

Per day trips:2.5 Airport – Islands I 4000₦ ride0.5 Vic. Garden – IKOY City I 6000₦ ride

Yearly maintenance cost: 1 driver’s monthly revenueFuel: 25% of Revenue

Revenue Simulation (Conservative)

Base (UBER Black) min

NGN/min(UBER Rate) km

NGN/km(UBER Rate) Price/Ride Ride/Day Monthly

AIRPORT-> Island UBER Flat Rate 6000 2.5 375000

Vic Garden - IKOY Area UBER Flat Rate 4000 0.5 50000Monthly Revenue

425000

Driver(in ZAR)

Lagos

19

According to expert: 500’000₦

Normal Case Monthly Revenue

NGN/ZAR: 0.059

Exchange Rate

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Normal CaseBase Scenario (Conservative)

Lagos: Ke Ya Rona expected profitThe conservative Uber Black case shows a loss, whereas the normal cases are both profitable – also here Uber X is the most profitable option

Ke Ya Rona Monthly Profit Calculation (₦)

Principal per VehicleTerm

Monthly Repayment

Ke Ya Rona min. income

Repayment * Interest @ 15%

Min Operating Profit

2,500,000 3,500,000 3 3

69,444 97,222

InsuranceTracker

105,131 79,861 14,583

127,500 106,944 20,417

5,366 5,366

5,321 -10,088

2,500,000 3

69,444

135,000 79,861

14,583 5,366

35,190

3,500,000 3

97,222

150,000 111,806 20,417 5,366

12,412

Uber BlackUber XUber BlackUber XToyota Camry Toyota Prado Toyota PradoToyota Camry


Currency: ZAR 314 -595 2’076 732

Nairobi

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Just 2 % of the whole population has access to credit card payment. Cash plays a relevant role in this market

Users can only pay through Google wallet, PayPal or a credit card added to their Uber account. Cash payment has been introduced for UberAuto

Main Players in the market: Ola, Uber, Meru, TaxiForSure

India is the second-biggest market in terms of geographical presence and growth. Uber estimate the market to be worth $40 billion

Car ownership: low rate of car ownership (24 cars per 1.000 people). The Indian market represent a huge opportunity for the taxy industry

Uber is carrying out pilot project to test the cash payment in India. Cash payment could open its service up to potentially millions of customers who wouldn’t be able to use it

Pune, Bangalore, New Delhi, Kolkata, Mumbai, Hyderabad, Chennai

Future Trends

Uber Payment System

Uber presence

Uber growth

Uber in India

Car ownership

Credit Card penetration

Taxi Industry

Despite the low level of credit card penetration, India represent the second biggest market for Uber

India: Country Overview

India

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Service: economic options and luxury service Reservation: website, mobile app call center. Payment: The cab service supports both cash

and cashless payment options with Ola money.

Average Bookings: 150,000 bookings per day Cities: 67 cities in India with more than

100.000 vehicles Ola has recently acquired TaxiForSure. The

two companies will continue to operate as separate entities

Service: premium service (BMW, Mercedes..) and low cost alternatives

Reservation: Website page, Mobile App and Callcenter

Payment: Cash payment and Credit Card Avarege trip: 60.000 rides per day Cities: 46 cities in India with around 20.000

cabs

Service: Meru Genie (low-cost taxi) and Meru Plus as a premium brand

Reservation: Mery mobile App, Website and CallCenter

Payment: Cash, Debit card and Credit Card Average Bookings: 20.000 trips per day. Cities:more than 15 cities and 1.000 cans per

city Service: UberX (low-cost), UberBlack

(Premium), UberAuto and UberGo Reservation: Uber App Payment: Credit Card and Online payment

. Cash accepted just for Uber Auto Cities: 7 cities in India served by a total of

15’000 cars Uber is evaluating the alternative of

acquiring a majority stake in Meru CabsOla Cabs

Meru Cabs

Uber

TaxiForSure

Market Share

The market potential is high considering the number of cab booking services offered, consolidation of the market has already begun

India: Competitive Environment

India

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• UberBLACK• UberX (low cost)

Uber takes 20 % commissions

Car Models

Revenue

Pricing Uber X:• Base tariff: 40INR• Per min Tariff: 1 INR• Per Km Tariff: 8 INRUber Black:• Base Tariff: 60INR• Per min Tariff: 2 INR• Per Km Tariff: 13 INR

• UberBLACK• UberX (low cost)• Uber Go (auto

prices)• Uber auto (cash

only)

No profit, zero percent commissionCar Models

Revenue

Pricing Uber X:• Base tariff: 55 INR• Per min Tariff: 1 INR• Per Km Tariff: 9 INRUber Black:• Base Tariff: 85 INR• Per min Tariff: 1.50 INR• Per Km Tariff: 12 INR

• 2/3 days training for each driver.

• Coaching: how to behave and talk to customers in order for the him not to feel insecure in

using Uber.

Driver training process

• Background check: the screening process includes address verification, national criminal database search

• Partners with registered for-hire drivers who have undergone the commercial licensing process

• Hold government issued IDs

• State-issued permits• Carry full commercial

insurance

Uber drivers requirements

New Delhi Bangalore Additional Information

Although requirements and training for Uber drivers are similar in the two cities, most elements of the Business Model are different

India: Target Cities - New Delhi and Bangalore

India

23

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Pranav BhaskarApaar JulkaSaad Ahmed

Insight InsightInsight

-UBER Head for Marketing & Partnerships

-Apace cabs, operating in New Delhi, Bombay & Bangalore for the last 3 decades

- Practicing law for 10 years

- Validation of ke ya rona business- Financial exclusion and market gap- Uber training 50,000 women to be drivers, who have no access to capital

- Cost and revenue of taxis in India and Bangalore.

- Taxi companies sub-let some of their cars to UBER/OLA

- How much money drivers make.- Entrepreneurship tendencies/ risk taking abilities of drivers

- Legal issues and complexities that might arise- Incorporating a company in India

Insight

India UBER Expert

Industry Expert Taxi Drivers Legal Advisor

Param Gupta

Vicky

Our contacts validated our findings about Uber’s potential and market attractiveness for Ke Ya Rona Business Model

India: Expert Contacts

India

24

Personal Learning

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Local Incorporation Procedure Car Ownership & Registration

• Register as private company with two directors as it is the easiest and fastest.Registeration is easy and can be done online at http://mca.gov.in/

• Get Director identification number (DIN cost – INR 100)

• Form 1A – to block the name of the company.

• Fill the following forms – 1,18 & 32 (cost INR 2500)

• Forms - http://mca.gov.in/MinistryWebsite/dca/downloadeforms/Download_eForm_choose.html• Can be time consuming, multiple steps and travelling to various offices.

• Bribing at different stages

To simplify use external consultant – http://www.indiafilings.com/partnership.php, cost INR 6000

• Vehicle Registration is mandatory under the law and essential to prove vehicle ownership.

• It is also required during the sale of a vehicle and transfer of its ownership.

• Form 20, duly filled.• Form 21 (sale certificate) issued by

manufacturer.• Attested copy of valid vehicle insurance

policy.• Attested copy of address proof.• Form 34, duly signed by owner and the

attested copy of pan no. of financier.One time road tax + registration fee.

vehi

cle

regi

stra

tion

• Registration certificate in original.• Form no.29 duly filled in duplicate (attested

one copy).• Form no.30 duly filled in duplicate.• Attested copy of valid insurance, in favour of

buyer.• Attested copy of address proof of buyer.• Attested copy of valid pollution-under-control

certificate.• Prescribed fee.• For commercial vehicles in addition to above• Permit surrender slip for S.T.A.• Challan clearance from Traffic Police &amp.• Tax clearance report from Accounts.

Proc

edur

e

Proc

edur

e/St

ate

of

bein

gRi

skM

itiga

tion

Tran

sfer

of o

wner

ship

Incorporating a company can be tedious but procedures are becoming more streamlined

India: Legal Affairs

India

25

http://mca.gov.in/

http://mca.gov.in/

http://mca.gov.in/MinistryWebsite/dca/downloadeforms/Download_eForm_choose.html



http://www.indiafilings.com/partnership.php

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Partnership with State Bank of India Eligible drivers who are willing to be

part of the program, will be connected to SBI by Ola

Down payment is around 10% of the car value

Interest rate on the loan: 13% (3% more than the average)

The loan repayment is structured in a way that the driver can pay it back on a daily basis (no EMIs since the drivers in India are more comfortable in disposing their loans bit-by-bit).

India is the only country in Asia where Uber has introduced this program.

Already 100 drivers in India are part of this program.

Financial scheme: - The driver register trough the Uber

platform- Low down payment - INR 60.000- Superior finance rates - Exclusive discount on vehicles for Uber

partner drivers (thanks to Uber partnership with auto making companies)

- Access to capital through Uber’s financial partners.

- Uber ensures enough business to drivers so that the vehicle is fully utilized thus assuring the EMI payment (monthly payment)

Issue: a big proportion of the Indian population do not own fixed assets or cash for the required down-payment and as a consequence can not access to vehicle financing. Ke Ya Rona

could capture this opportunity to fulfil the market gap.

Vehicle Financing program Vehicle Financing program Ola CabsUber

Both Uber and Ola already provide financing program to drivers but a gap in the market does exists

India: Vehicle Financing Alternatives

India

26

New Delhi

Financial Analysis and Choice of Cars

Personal Learning

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Driver’s ProfitNormal CaseBase Case


FuelMaintenance

Other (Parking)

DriverIn ZAR

83,125

1,00,0000

24,938

30,00024,938

30,000333 333

31,4175,969

38,1677,251


7 trips/day, from business center – central Delhi

Revenue SimulationRevenue Simulation

(Conservative)Base (UBER Rate) km Rs/km

(UBER Rate) minutes Rs/min Price/Ride Ride/Day MonthlyTrip: from Gurgaon to

central Delhi 55 40 9 60 1 475 7 83125

Usual Revenue Revenue/day Days Monthly

4000 25 1,00,000

1500 1500

Driver revenue is 4000/ day.Fuel 30% of revenue.Parking is hard to find, maintenance is cheap as dealership offer 2 years free.Driver average salary – 15,000 to 20,000Maintenance includes only servicing and not repairs.

0Usual Case (conversation with cab

operators)

New Delhi: Uber X drivers performanceDriver revenues and related profit are considerably high in Delhi as Uber does not take any commission on bookings yet

New Dehli

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Driver’s ProfitReal CaseBase Case


FuelMaintenance

Other (Parking)

DriverIn ZAR

1,14,625 1,50,0000 0

34,388 45,00034,388 45,000750 750

43,6008,284

57,75010,972


7 trips/day, from business center – central Delhi



(UBER Rate) minutes Rs/min Price/Ride Ride/Day MonthlyTrip: from Gurgaon to

central Delhi 85 40 12 60 1.50 655 7 1,14,625


6,000 25 1,50,000

1,500 1,500

Driver revenue is 6000/ day.Fuel 30% of revenue.Parking is hard to find, and expensive.Maintenance includes only servicing and not repairs.Driver average salary – 15,000 to 20,000

Usual Case (conversation with cab operators)

New Delhi: Uber Black drivers performanceUber Black appears to be more profitable for the drivers compared to UberX

New Dehli

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Real CaseNormal ScenarioKe Ya Rona Profit Calculation

Uber BlackUber XUber BlackUber X

Cost of vehicle after Uber discount

Down payment @10%

PrincipalInterest @12%

Ke Ya Rona min. inc.

Repayment + Interest

Min Operating

Profit

7,30,000 13,00,000

6,57,0001643 2925

InsuranceTracker

24,93815,3301,667

34,38824,3753,167

317 3177,624 6,529

30,00015,3301,667317

12,687

45,00024,3753,167317

17,142

Toyota Etios Toyota innovaToyota EtiosToyota innova

7,30,000 13,00,00073,000 73,0001,30,000 1,30,000

6,57,00011,70,000 11,70,00029251643

Monthly payment + interest 15,330 15,33027,300 27,300

Uber partners with dealerships to provide discounted vehicles, 12% nominal interest rate

New Delhi: Ke Ya Rona expected profitIn both the considered scenarios, Ke Ya Rona will be profitable with both car models.

New Dehli


Currency: ZAR 1,449 1,240 2,410 3,256

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Revenue of DriverBased on interviews with Saad, Apaar & Vicky

Usage in the marketUber X – Toyota etios, Maruti swift dzireUber Black - Toyota Innova, Mahendra Xylo, Suzuki ErtigaUber Go – Maruto Alto, Toyota LivaUberAuto – Bajaj, piaggio

LowLow

High

High

Uber Auto• Bajaj auto• Piaggio

Uber Black• Toyota Innova

Uber X• Toyota etios

Usage in market

Reve

nue

for d

river

Uber Go• Maruti alto• Toyota live


AnalysisRevenue for driver: • Low monthly payments by leveraging the

partnership between UBER and Toyota, the car gets a Rs 60,000 discount.

• Higher fuel efficiency than competitors + 2 years of free maintenance leads to higher profit margins..

Usage in the market: • Etios is not perceived as a taxi, but is now

gaining traction due to its price and features.

• Does not need specialized mechanics and parts are easily available

• Toyota is preferred over Maruti by customers as it is a “Japanese” automaker

Uber Black Attractiveness Analysis

Revenue for driver: • Low monthly payments by leveraging the

partnership between UBER and Toyota, the car gets a Rs 1,00,000 discount.

• Higher market traction, “the taxi that is preferred”.

• Higher fuel efficiency than competitors + 2 years of free maintenance leads to higher profit margins.

Usage in the market: • Is the premier taxi in the market due to its

comfort and performance and is used for long distance travel.

• Does not need specialized mechanics and parts are easily available.

• Toyota is preferred over Maruti by customers as it is a “Japanese” automaker.

New Delhi: Car models suggestionBoth UberX and Uber Black would be profitable, Toyota Innova could be a good fit considering the high demand in the market for it as a taxi

New Dehli

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Bangalore

Financial Analysis and Choice of Cars

Personal Learning

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Bangalore: Uber X drivers performanceDespite the 20% booking fee applied by Uber, the driver’s monthly profit with Uber X would considerable



FuelMaintenance

Other

DriverIn ZAR

54,250 62,50010,850 12,50016,275 18,75016,275 18,750

333 333

9,9171,884

11,5672,197


7 trips/day, 20 km average distance travelled



(UBER Rate) minutes Rs/min Price/Ride Ride/Day MonthlyBusiness district - center 40 30 8 30 1 280 7 54,250


2500 25 62,500

600 600

• Driver revenue is 2500/ day.• Fuel 30% of revenue.• Maintenance is cheap as dealership

offer 2 years free.• Maintenance includes only servicing

and not repairs.


Bangalore

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Bangalore: Uber Black drivers performanceUber Black in Bangalore appears to be more profitable for the drivers if compared to Uber X



FuelMaintenance

Other (Parking)

DriverIn ZAR

89,250 1,00,00017,850 20,00026,775 30,00026,775 30,000

334 334

16,9163,214

19,6003,622




(UBER Rate) minutes Rs/min Price/Ride Ride/Day MonthlyBusiness district - center 60 30 13 30 2 450 7 89,250


4,000 25 1,00,000

600

• Driver revenue is 4000/ day.• Fuel 30% of revenue.• Maintenance is cheap as

dealership offer 18 months free.• Maintenance includes only

servicing and not repairs.600

7 trips/day, 20 km average distance travelled


Bangalore

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Real CaseNormal Scenario

Bangalore: Ke Ya Rona expected profitGiven the considered assumptions, Ke Ya Rona will reach profitability only with Uber Black

Ke Ya Rona Profit Calculation

Uber BlackUber XUber BlackUber XCost of vehicle

after Uber discount

Down payment @10%

Principal

Interest @12%

Ke Ya Rona min. incomeRepayment + Interest

Min Operating

Profit

8,01,400 9,10,000

7,21,2601803 2048

InsuranceTracker

16,27516,8291,667

26,77517,0632,500

317 317-2,538 6,896

18,75016,8291,667317-63

30,00017,0632,500317

10,121

Toyota Etios Nissan SunnyToyota EtiosNissan Sunny

8,01,400 9,10,00080,140 80,14091,000 91,000

7,21,2608,19,000 8,19,00020481803

Monthly payment + interest 16,829 16,82919,110 19,110

Uber partners with dealerships to provide discounted vehicles, 12% nominal interest rate

Bangalore


Currency: ZAR -482 1310 -11 1,932

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Bangalore: Car models suggestionAmong the Uber Black car models, the Nissan Sunny is the perfect fit due to low monthly payment & cross platform use

LowLow

High

High

Uber Rikscha• XXXXXXXXXXXXXX

Usage in market

Reve

nue

for d

river

Uber SUV• XXXXXXXXXXX

Uber Lux• XXXXXXXXX


Analysis

Uber Black Attractiveness Analysis

Revenue of DriverBased on interviews with Saad & ApaarUsage in the marketUber X – Toyota etios, Maruti swift dzire, Mahendra veritoUber Black – Toyota carolla Nissan sunny, Mercedes e-class

Uber Black• Nissan Sunny

Revenue for driver:• Cheaper option than other Uber black

vehicles and easier to finance.• Discount on vehicle due to

partnership between Uber and Nissan. .

• Higher fuel efficiency than other Uber black vehicles

Usage in the market: • Can be used on both Uber platforms.• Viewed as a spacious and comfortable

class of vehicle.• Parts made in India hence easy to

find.

Uber Black• Toyota Etios

I. Revenue for driver: • Toyota etios to leverage the partnership

between UBER and Toyota, the car gets a Rs 60,000 discount.

• Higher fuel efficiency that competitors + 2 years of free maintenance leads to higher profit margins.

• Toyota is preferred over Maruti by customers as it is a “Japanese” automaker.

I. Usage in the market: • Etios is not perceived as a taxi car, but is

gaining traction now due to its price and features.

• Does not need specialized mechanics and easy availability of parts.

Bangalore

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• Uber wants to hire 50,000 women drivers in India and helping them with commercial driving licenses, access to various financial programmes and continuous training.

• The main obstacle for these women to own their own vehicle is the initial investment (down payment - ±$1,000) as they don’t have personal assets that cane be used as collateral or sufficient working capital

India Africa (Kenya)

New Opportunity Identified

• Minimum yearly income must be higher than 75,000 KSH, to get financing from a bank.

• 20 % down payment on second hand vehicles.

• About 30% of the population does not belong to this category and hence are financially excluded

• Since the lack of financing, perspective entrepreneurs do not get a chance

The inability to pay a down payment in India as well as the financial exclusion to qualify for a finance-scheme in Kenya, open a finance opportunity for Ke Ya Rona in those markets

Recommendation

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Dear bank, can you please finance this car for me?

We surely will finance 90% of it, but you have to pay a 10% down payment first

How can I possibly pay a 10% down payment? We are

happy to help you out here Madame.

Business Model Re-inventionBasics• Down payment fulfilled by Ke Ya Rona• Prerequisite that Uber payments come to Ke Ya Rona

account

Repayment• During months of profit Ke Ya Rona takes – principal +

interest• The payment depends on driver P & L and interes

ratet is flexiblePayment is ongoing till amount is recovered (no time frame)

FutureAfter repayment the contract can be • Terminated• The driver can choose to work with us.• Entrepreneurial training

1.

2.

3.

Example India Bracket (New Delhi)

<20,000 = 20%10,000 – 20,000 = 10%>10,000 = 5%

Business Model Re-inventionKe Ya Rona can enter potential markets with an adapted business model which specially fits the local needs of clients

Recommendation

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Final RecommendationAccording to our analysis, three out of four cities show great business opportunities for Ke Ya Rona

City Recommendation

New Delhi

• Leverage on the no profit Uber business model, which will stay the same in the near future

• Uber is willing to spend big to gain market share• High incentives for drivers • New Delhi actually is a cluster of 3 big cities, making the average car ride long • Strong contacts in the city, willing to help on a multiple fronts • Wheels are already in motion, quick entry is possible

Nairobi

• High potential market, identified as one of the key market of UBER in Africa• Low competitive intensity in the segment of Business Customer switch is also the

recommended segment with the relatively high profit both for Driver and Ke Ya Rona

• Ke Ya Rona offers exactly the right business model to close the market gap for financially excluded entrepreneurial-minded taxi drivers

Lagos

• After prices dropped by 20%, a 30% increase of earnings by Uber drivers was noted, and a 23% in demand

• Uber will not introduce the cash payment system in Lagos as there is no need for it. Lagos’ credit-card penetration per capita is very high

• Currently, most Uber drivers are employed by “hailing-businesses”. Private drivers are in minority due to lack of financial access. Micro-finance institutes are generally not financing cars. Employed drivers usually get their fix payment of 50kN per month low incentive.. Private drivers however are more motivated to generate money

Bangalore

• The financial analysis shows that although drivers' achievement in terms of profit is positive, Ke Ya Rona does not achieve high results.

• Both, in the normal scenario and in the real scenario Ke Ya Rona does not reach profitability with Uber X while Uber Black is performing better and it's profitable.

• Despite Uber Black’s profitability in Bangalore, the result achieved appears to be way lower than the selected cluster's average for this reason we suggest not to prioritize Bangalore

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Recommendation

39

Thank you for your attention!

Q&A

Economy & Finance

Bocconi-Ke Ya Rona-New City Growth