Drive Electric makes a blueprint for EV car rental

From the newsletter

South African electric vehicle (EV) rental company Drive Electric is making strides in a market that is dominated by internal combustion engine (ICE) vehicles. The company’s services which range from $80 per day to $950 per month, have seen an increase in demand, according to the company’s CEO James Gallo.

• Tourism has been the key driver of EV rentals at Drive Electric. Many travellers seek affordable yet unique driving experiences. The most popular rental model is the Volvo XC40 Recharge, though the company should consider adding the Volvo EX30, the best-selling EV in South Africa in 2024.

• In South Africa, the car rental sector generates over $1.1 billion annually, though the EV rental segment remains nascent.

More details

• Drive Electric was founded in 2022 and operates in South Africa's major cities; Cape Town and Johannesburg.

• Africa’s car rental sector is projected to grow at a 6.55% annual rate between 2025 and 2029, reaching a market volume of $5.44 billion by 2029.

• However, the adoption of EV rentals faces significant challenges, but early signs of demand are evident. For instance, Nopea Ride in Kenya attempted an EV ride-hailing model but struggled due to high operational costs and limited charging infrastructure.

• Africa's EV rental market is rapidly expanding and the diversity of EV rentals in Africa highlights a strong demand for electrified transport across different economic segments, from public transit and corporate fleets to micro-mobility solutions, making it a strategic sector for investment and innovation.

• The span covers heavy-duty electric buses (BasiGo, JET Motors, Loxea Kenya), light-duty passenger EVs (SolarTaxi, Siltech World, Greenfoot Africa, Equator Mobility), and corporate fleet rentals, offering sustainable transport solutions for businesses and individuals.

• Last-mile and urban mobility rental solutions are also growing, with companies like Emo Mobility (Tanzania) providing electric three-wheelers, Rabbit Mobility (Egypt) offering electric scooter rentals, and E-Waka (Kenya & Rwanda) focusing on electric bicycles.

• The EV rental market in Africa is primarily targeted at environmentally conscious individuals, corporate clients, and tourists looking for sustainable transport solutions. Companies are increasingly shifting to EVs as part of their corporate sustainability initiatives, aiming to reduce their carbon footprint and operational costs.

• Three primary business models exist for EV rentals in Africa: short-term rentals (daily/weekly), long-term leasing (corporate fleets), and ride-sharing models. Each has its advantages and drawbacks. Short-term rentals generate higher revenue-per-day and are ideal for tourists and business travelers, but they are heavily dependent on charging accessibility. 

• Long-term leasing, where companies rent EVs for their employees, offers a stable revenue stream but requires significant upfront investment in fleet acquisition. The ride-sharing model, used by companies like Uber and Bolt, provides continuous revenue generation but exposes the vehicles to rapid battery degradation due to high mileage. 

• Selecting the right EV models is critical for rental success in Africa. Durability, battery range, and affordability are key considerations. Models like the Tesla Model 3 (450-500 km range) and BMW iX3 (460 km range) suit premium rental markets, while budget-friendly options such as the BYD Dolphin (400 km range) present an opportunity for mass-market expansion.

Our take

• Short-term EV rentals face challenges due to limited charging infrastructure and high upfront costs, making them less viable. However, long-term corporate leasing offers a stable revenue model, as seen with BasiGo (Kenya) and Drive Electric (South Africa). Investors should prioritise business-to-business (B2B) leasing, targeting corporate clients, ride-hailing services (Uber, Bolt), and logistics fleets.

• Insurance costs for EVs remain high, primarily due to the expensive battery replacements and the limited availability of repair parts in Africa. Furthermore, depreciation rates for EVs in the African market are uncertain, as the resale market is still underdeveloped.

• The African EV rental market will be driven by affordable locally assembled and Chinese EVs like BYD and Wuling. High import costs of European EVs (Tesla, BMW, Volvo) will push rental companies toward budget-friendly alternatives. Interested companies should focus on importing or assembling sub-$25,000 EVs, prioritizing SUVs with durable batteries suited for African conditions.