Source: Chimgozirim Nwokoma/Techpoint

Treepz, a Nigerian mobility startup, has announced changes to its business model that will see it move from a bus-hailing startup to a car-sharing service. The startup, which launched as Plentywaka in 2019, was founded by Onyeka Akumah, Johnny Ena, Afolabi Oluseyi, and John Shuaibu as a bus-hailing service a few months before the COVID-19 pandemic necessitated global lockdowns.

Since then, it has raised $4.5 million from investors, been accepted into Techstars Toronto, launched in Kenya, and acquired similar businesses in Ghana and Uganda. The startup says these acquisitions have helped it facilitate more than three million trips across the four countries where it operates. 

While it offered a bus-hailing service to the public, it ran a bus-rental service that helped companies like Tek Experts and Wakanow to transport employees without owning the buses they used. In doing this, the startup says it discovered that rental services gave it a wider profit margin than bus-hailing, leading to the decision to launch a consumer-facing car-sharing service.

Its car-sharing service allows individuals and car rental companies to list their cars for rent, with prices starting from ₦30,000 ($65). At the moment, cars listed on the platform come with a chauffeur but the startup says users would soon be able to drive themselves. By launching a car-sharing service, it hopes to be the mobility partner for users who are travelling or need a vehicle to move around for a brief period.

According to Akumah, “The new Treepz is an exciting innovation for transportation in Africa. We are making better use of more than 26 million vehicles available on the continent to provide commuters with enjoyable and fun transportation service as they travel for work or simply enjoy a smooth ride across the safaris in the continent.”

While the consumer-facing brand has just launched to the public, Akumah says at least 80 vehicles have been uploaded to the platform and expects that number to increase once they begin onboarding car rental companies across the four markets it operates in.

Before we go on, a little definition of terms to aid understanding. Not to be confused with the dictionary definition, car sharing is a model that allows you to rent other people’s cars through an intermediary. Like an Airbnb but for cars.  

How viable is a car-sharing business in Africa?

Moving around in most parts of Africa can be frustrating. One has to contend with poorly maintained vehicles and often, vehicles that are not roadworthy.

While ride-hailing startups like Uber and Bolt provide some respite, their pricing puts them out of the reach of many. Bus-hailing startups try to bridge these gaps by providing a platform with which users can book a bus, usually ahead of schedule. While some operate an asset-light model where they do not own the buses, others own the buses that are used on the platform.

In Nigeria, startups like Shuttlers, Hubryde, and previously Treepz play in this space but while Shuttlers is doubling down on Nigeria, Treepz is moving to car rental buoyed by its experience with B2B customers.

Although the startup appears to be optimistic about the potential success of this new phase, there are a few aspects that raise questions. For starters, Africa’s car-sharing market does not appear to hold much promise, especially for a venture-backed business. Not only do revenues not resemble what venture-backed companies would go after, the number of users does not look impressive.

For a car-sharing business to work at venture scale, there must be enough vehicles and individuals willing and able to use these vehicles. Different estimates put the number of vehicles in Africa at 26 million. The US, on the other hand, had 278 million vehicles registered in 2021.

The other factor to consider would be the financial capacity of the market. According to the World Bank, the GDP per capita in the four markets Treepz operates in ranges from $883.9 in Uganda to $2,363 in Ghana. Contrast this with the US where GDP per capita is $70,248.

What these numbers show is that there aren’t enough vehicles, but more importantly, that many individuals in Africa do not have the financial capacity to rent them. Earlier, I pointed out that the cost of renting a vehicle from Treepz begins at ₦30,000 ($65). That’s the equivalent of Nigeria’s minimum wage, which many state governments have refused to adhere to. 

According to Statista, car-sharing revenues on the continent are expected to hit $6.53 million in 2023. By 2026, they are expected to reach $9.45 million by 2027 while users are expected to hit 195,000. To put that in context, Treepz has raised $4.5 million since its launch.

Responding to questions on the market size, Akumah disputes Statista’s numbers and argues that the 26 million vehicles on the continent must bring in more revenue than Statista’s reported numbers.

“I can actually debate that because you can’t have 26 million cars and the likes of Hertz [and] Enterprise consistently finding ways to expand on the continent and everyone wants to share $9 million. It’s all speculative and what I would consider assumptions because no one has taken the bull by the horn to want to innovate in that space and I think that is what Treepz is now in the forefront of.”

While he disagrees with Statista’s numbers on car sharing, the car rental space is a more profitable sector with revenues expected to reach $3.88 billion in 2023. Still, that presents a different challenge as Treepz may have to buy vehicles, which increases its operating cost, something the startup appears keen to avoid.

As a consumer-facing business, significant marketing resources will need to be spent if consumers will see Treepz as a credible alternative to ride-hailing companies like Bolt and Uber or even other rental companies. However, Akumah says it intends to use partnerships with event organisers across Africa to drive growth, signalling that it envisions most of its customers to be travellers.

Over the next 18 months, Treepz plans to build out APIs which online travel agencies, airlines, and hotels on the continent can integrate. Using these APIs, customers of these businesses can select transportation options as they book trips or hotel stays.

Expanding too quickly?  

Since it launched in 2019, Treepz has acquired similar businesses in markets it planned to expand to, including Ugabus in Uganda and Stabus in Ghana. When you add its planned Canadian expansion, one gets the sense that the startup spread itself too thin too soon but Akumah has a different view about this. The acquisitions, he says, were a market entry strategy that allowed Treepz to start operations in the aforementioned markets almost instantly.

“I think it’s the perspective of who looks at the acquisitions to understand whether it’s early or late. For us, they were strategic moves. We could have gone into those markets to start from scratch and started looking to recruit people or go through a model where we acquired a startup that was already doing the business that we wanted to do in that market and almost immediately, business just kicked off.”

He also adds that in markets like Nigeria and Kenya, Treepz generates enough revenues to run without external funding.

Having seen success with a B2B bus-rental service, Treepz appears confident that it would see similar success with a B2C product. However, the economic realities of the African market cast doubts over this decision.

Source: Chimgozirim Nwokoma/Techpoint