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The car-sharing future

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As MBA students at the Nelson Mandela Metropolitan University, Ntando Kubheka and Tumisang Marope had to draw up a business plan for a course project. Through their research, they found that a collaborative consumption economy, or sharing economy, was becoming a growing trend internationally.

“In the US alone the sharing economy has grown to over $3tr over the last four years. The second trend is people do not want to buy cars because of environmental and congestive issues, and debt levels don’t allow [many people] to own cars,” says Kubheka.

As the car-sharing trend picks up, vehicle manufacturers seeking to gain market share where they are losing out on new vehicle sales have started introducing car-sharing services. BMW and Diamler offer car-sharing services in North America and Europe, and Volkswagen has been operating its Quicar service in Germany since 2011.

On the back of their research, Kubheka and Marope developed a business concept for a car-sharing service and co-founded Locomute in 2014. Locomute, which was officially launched in May 2015, allows users to locate the car closest to them from a pool of available cars and then book it for either short- or long-term use.

How it works

Customers register to become Locomute members. During the registration process, Locomute asks for certain biographical and driver’s licence details. Verification is done through the electronic national administration traffic information system (eNatis) to check if the driver’s licence is legitimate and whether the address given is correct.

“Then we would send you the login details for the app. Once you have the login details you are able to log into the app, and you will be able to locate which vehicle is nearest to you, or nearest to the destination to which you are flying, if you are flying. And then you would book or reserve that vehicle.”

The app’s screen map will indicate the vehicle closest to the customer. Customers have the option to either reserve the car 15 minutes in advance, or start the booking process directly once next to the car.

When users arrive at the booked car, they unlock the vehicle using the app. Once inside, the key is kept in a keybox in the glove compartment. Users unlock the car by entering a personalised pin, and evaluating the state in which they found the car.

Before disembarking, customers collect their belongings, put the key back in the keybox, and tap the lock icon on the app to lock the vehicle.

The customer is then billed accordingly via the card they registered with, which can be either a credit card or cheque card. The customer is billed at R1.80 per minute and R3 per kilometre, but the first 20 kilometres of every hour are free, says Kubheka.

“It all happens on an app,” he says. “When you are done with the car or you have reached your destination, you leave the car on the side of the road and it’s ready for the next customer. What we do in the background is look after the vehicle, make sure it has enough fuel, and clean it.

“And we make sure our customers don’t pay for parking because we take care of those costs, as well as e-tolls and fuel, so customers only pay for the time and mileage used on the car,” he says.

How does the service differ from Uber, or other taxi services and vehicle renting companies? Kubheka explains that Locomute’s pricing is flat and its costs are quite low – making it more affordable than Uber. He says they have innovative technology, no paperwork, and, unlike car rental companies, require no deposit.

Locomute allows commuters to use their vehicles for either a few minutes or a few hours, depending on requirements. Their fleet of around 300 cars is currently available in Cape Town, Johannesburg, Ekurhuleni, Pretoria and Durban.

“It’s expensive to own a car and it’s even more expensive to maintain it. So our services come in handy because we take care of those things and you only use the car when you need it,” he says.

According to a Boston Consulting Group (BCG) report car sharing will keep growing, but it will not disrupt the automotive industry - Europe, North America and Asia-Pacific combined see 2.5bn minutes of car-sharing booked per year, which totals €650m in revenue.

BCG estimates that 14m people in Europe will be registered for car-sharing services by 2021.

Locomute’s four business partners, including Marope, Sibusiso Xaba and Vuyisile Majola, all dug deep into their own pockets to inject seed capital to buy a fleet of vehicles that would get the business off the ground.

As they seek to expand the business, the partners plan to head to Silicon Valley with Investec in May to approach venture capitalists in the hope of raising capital to fund the next phase of the business. Plans include allowing individuals and businesses to make their vehicles available for sharing, and tapping into the rest of Africa.

This article originally appeared in the 14 April 2016 edition of finweek. Buy and download the magazine here

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