Careem studies start-up market in Egypt to invest in transport and e-commerce sectors to achieve their expansion plans

Mohamed Alaa El-Din
12 Min Read

The transportation app, Careem, aims to study the start-up market in Egypt to invest for the best of its expansion strategy, with a focus on e-commerce and transportation sectors.

According to Rami Kato, head of Careem Egypt operations, in an interview with Daily News Egypt, the company’s investment in Swvl is part of its strategy to spread its services, especially as Swvl offers outstanding transportation services at lower prices.

What is the strategy of the company in the Egyptian market after the many changes that have occurred recently, such as the increase in gasoline prices and the increase in prices of services and the acquisition of Swvl?

After the increase in fuel prices, the service cost bore by Captains increased. It was necessary to move quickly so as not to have them bear this cost alone by balancing the cost and benefit so that they will keep working. At the same time, the service must remain affordable to clients, in addition to being safe and comfortable. This is the equation we are constantly trying to solve to guarantee a good service.

We tried to achieve this equation. Last week, we cancelled the extra cost during peak time to relieve the customer while paying the difference to the captains.

As for the strategy, we have a goal to cover the entire republic over several phases. Our latest investment in Swvl aimed to help us reach this goal. Through this investment, we became able to provide a convenient and secure transportation at a lower cost, allowing us to reach the largest number of users.

Do you expect the new pricing for your services to cause demand fall?

On the contrary—after the new pricing, demand has increased. The demand is not only linked to the increase in service cost, but relies on the new fuel prices and the surge in cost of maintenance and finding parking spots in Cairo, along with the high price of cars. Our services will save the cost for clients. Rather than buying a car, consuming it, and paying for fuel, the client can get the same comfortable transportation at a lower cost.

Does the rise in car prices make it difficult to add new vehicles to your service fleet?

Of course, there is a direct impact. We will see a decline in the number of modern cars over time. But we have not yet reached this stage.

How do you overcome this problem?

We are working to provide new solutions in a way that is not contrary to our strategy and which depends on providing a convenient and safe transportation means. This includes the latest investment in Swvl. We are also looking at other solutions, such as cooperation with financial institutions so we can help the Captains buy new cars or replace their current ones.

We also expect that the financial leasing law to help provide access to cars for the captains. According to the information we have, the law will secure access for individual citizens, as well as institutions.

At present, we do not accept the captains without a car, but we are working on solutions in cooperation with the financing institutions to help the captain get a car by helping international institutions to cover the credit risk.

Why is there a difference in the pricing of your services from one province to another?

This is normal for the difference in the economics of providing the service in each governorate. There is a difference in the purchasing power of each province from the other, as well as the distances and density of population and traffic.

Back to the point of investing in Swvl. What were your standards to choose this company?

Swvl was the company that best fits our strategy. Their app had a number of characteristics that are suitable for the way we work. They allow the users to book rides. Their strategy also matches ours. Instead of reinventing the wheel, we have invested in them to serve our future plans for a non-controlling share.

Are there other companies you are considering investing in?

During the coming period, we will conduct studies of the start-up companies in the Egyptian market to search for suitable companies to invest in, provided that they are compatible with our strategy in the fields of electronic commerce or transport of various kinds.

The State is working on a law for the participatory economy in consultation with the providers of services based on this system in Egypt. Where is this law standing now? What are the developments of this law?

There is still ongoing discussion in this regard, in cooperation with the Ministries of Investment and Transport with all the companies operating in the market. We believe that the discussion is moving in a positive way, which allows the development of a law that regulates the activity and grants the state rights as well as service providers.

Are there any items in the bill that you currently feel need modifications?

The law is still under construction and we have had some objections to some of the items and we have found a response from the government.

There was a clause within the draft law, which stipulates the driver of the car to be its owner. How do you see the impact of this item, if the law passes with that form?

There are a large proportion of captains who do not own the cars they drive. With the float of the pound, the prices of cars hiked, which lowered the number of car owners. Based on our statistics; there are approximately 100,000 captains on the market supporting families of five each. This means that this sector is providing living hood for 500,000 people. This is why the law must be reviewed.

Is there a response from the government?

We have seen a response from government officials to open the debate on this item to reach a compromise formula.

What percentage does Cairo represent for your activity?

It is difficult to say accurate figures for our activity, but in general, Cairo represents about 40% of any business in Egypt, where some 30 million people reside, out of 90 million in total.

How do you see competition with other companies? What is your competitive advantage?

Competition in Egypt is sharp and any new player entering the market is finding it very difficult to get into. There are many companies that have not been able to compete and had to exit the market. It is difficult for new companies to enter the market and compete.

In terms of competitive advantage, we are working to provide a secure service of high quality both in terms of car or captain, in addition to providing an excellent customer service so that the customer can communicate with customer service by telephone during the trip or via e-mails after it. Currently, we have 650 customer service agents in Egypt and other markets in 80 cities around the world. We have plans to increase the number to 1,000 in the first quarter in the coming year.

Are there agreements with companies to provide transportation service for their employees rather than bearing the cost of transportation?

We already have a working team discussing that with several large companies. These companies use a sales team, which meant providing a car per individual. This was bad for the economics of the company. Through our services, the employees can get the service they need without the company having to afford buying a car. Some companies are about to sign agreements with us.

Are you considering carpooling?

We are currently studying the application of the service in other markets, before inaugurating the service in Egypt.

What is your number of the current and target captains?

We now have over 60,000 captains working with us, with a plan to increase the number to 200,000 by the end of 2018.

What is your growth rate?

Currently we grow at as high as 30% per month. This is because the market is big and the service is still infant. Our studies show that the entire sector, including our competitors, account for only 2% of the transportation services in Egypt. This means that there is still a high potential for growth.

There is a complaint from some captains that the promo-code and free trips cause a delay in receiving their share?

This was not one of the most important requests from the captains. We pay them every two weeks, so sometimes the money got delayed. This was solved by paying them on weekly basis with plans to shorten the period even more. I think that this is not a problem, as 80% of trips are paid in cash.

Are you providing new payment solutions?

Currently, we have more than one payment method, such as credit cards and Fawry, next to the e-wallet service provided in cooperation with a private bank.

Are there new products you are considering launching?

There are already a number of products in the pipelines, one of which will be earmarked for students.

Have you started making profits?

No, we have not yet started making profits from Egypt.

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