Mogo finances first 1000 EVs

From the newsletter

Kenya's asset financing company, Mogo, has sold over 1,000 e-bikes worth more than $1.5 million, significantly contributing to the country's transition to electric mobility. The EV financing space, particularly for e-bikes, has attracted many other asset financing companies, such as Watu Credit and 4G Capital, and banks as well.

• Mogo, which was incorporated in Kenya in 2012, has a presence in eight counties. Its main products are car financing, logbook loans and loans for two- and three-wheeler operators.   

• The company received $10 million in debt financing from the US International Development Finance Corporation (DFC) in May 2024, which it aims to deploy to finance 10,000 e-bikes in two years.

More details

• Kenya's market for fuel motorcycles is one of the largest in Africa. There are over 1.2 million riders, with nine out of every 10 used for commercial purposes. But demand keeps increasing, especially with urbanisation and lifestyle changes that have created a demand for last-mile deliveries to homes and offices.

• The need for affordable transportation is thus becoming more important. Electric motorcycles have proven to be less costly compared to fuel motorcycles. Thus, riders are opting to switch to e-bikes to reduce their transport costs, attract customers, and increase their daily take-home pay. Research says that riders can increase their earnings by up to 30% by switching to electric motorcycles.

• But the high cost of EVs makes them unaffordable to many. The sector being more informal means riders cannot easily secure loans from banks without collateral. Asset financing companies are bringing the solution. So far, over 50% of all electric motorcycles sold in Kenya have been financed.

• Electric motorcycle companies have partnered with asset financing companies to make e-bikes affordable. Mogo, one of the players, has partnered with e-bike manufacturers like Ampersand, Roam, Arc Ride, and Spiro to provide financing for their customers. This is structured in a way that a customer pays a down payment of $116 followed by monthly repayments that can range from twelve to eighteen months, depending on the customer's preference. This has made e-bikes more affordable to acquire.

• The asset financing space has attracted several other players, including Africa's largest fintech company, M-Kopa, Watu Credit, 4G Capital, and even banks like KCB and NCBA.

• M-Kopa last year secured one of the largest funding rounds at $250 million and has announced a shift in its financing focus from solar home systems to EVs. So far, it has financed 1,500+ electric motorcycles in Kenya. It has partnered with electric motorcycle manufacturers Roam and Ampersand, ride-hailing company Bolt, and online retailer Greenspoon.

• Banks have traditionally shied away from lending to informal sectors. But that is changing. They want to expand their customer base, and the EV space seems to be one of the sectors they are targeting, particularly commercial riders. NCBA has set aside about $15.5 million for e-bike financing, covering up to 80% of the cost, and KCB targets to finance 100,000 e-bikes at an interest rate of 13% with a two-year repayment plan.

Our take

• Financing EVs is a big market in Kenya. Many willing to switch can't afford the upfront cost of an electric motorcycle, and the majority already own fuel motorcycles. Convincing them to switch is hard, especially with the high cost of e-bikes. But providing financing makes it attractive and won't drain their pockets all at once, allowing for a smoother transition.

• Competition is shaping up in this growing market. Targeting the rural market is the new frontier, as it presents a big untapped opportunity. E-bike companies like Roam are expanding to these areas to meet the rising demand. Likewise, financing companies should follow suit to capitalise on this emerging market and support wider EV adoption.