November sees EV investor pullback

From the newsletter

The number of investors in November declined by 50% compared to October. Funding also slowed down, as shown in our previous analysis. Our analysis this month shows that Launch Africa has been the most consistent investor in the last two years; however, their funding rarely goes beyond $0.5 million.

• Both November and October had equity investors as the largest pool of investors. In November, the equity investors included Digital Energy Facility, Mauritius-based Launch Africa, JLL Foundation, and Senagal’s Teranga Capital.

• The debt investors were limited to Egypt, and they included EFG Corp-Solutions, Bank NXT, and the Egyptian Gulf Bank (EG Bank).

More details

• 85% of November investors primarily operate in Africa, and their years of operations vary significantly. Most of the equity investors have run for an average of the last five years, while the debt investors (major banks) have been in operation for the last three decades.

• Launch Africa, founded in 2020, has been making consistent investments in different areas of Africa’s e-mobility. In the last 24 months, it has invested in nine EV startups. Through this, it has invested a total of $4.3 million. Although the figure might seem small, their impact is big since they have funded different companies in East, South, and West Africa. This shows how the company can stretch its financial muscles across the continent.

• While Digital Energy Facility, Launch Africa, JLL Foundation, and Teranga Capital chose pre-seed as their choice of funding, EFG Corp-Solutions, Bank NXT and the Egyptian Gulf Bank chose debt financing. This might be triggered by how different investors perceive risks in Africa’s EV sector. The equity investors see hope and growth; thus, they choose a high-risk, high-reward financing model. Also, startup companies lack vast assets, limiting them to acquiring debt financing.

• The investors' focus seems to be on software rather than EV hardware. Our data shows that 57% of the investors trust companies that are offering electric ride-hailing services, EV charging mobile applications, and last-mile delivery services. Currently, the African EV market is majorly focused on two- and three-wheelers, and for them to scale and become profitable, this is the market they should tap into now.

Our take

• Investors are targeting critical gaps in Africa's mobility ecosystem. The preference for auto-tech solutions like ride-hailing and last-mile delivery reflects an emphasis on solving pressing urban mobility challenges. These areas offer scalable models that align with Africa's current market realities, where demand for affordable, sustainable, and accessible transport solutions is growing rapidly.

• The dip in investor numbers this month could stem from market uncertainties. Economic volatility, regulatory hurdles, or underwhelming returns from earlier investments might have made some investors hesitant. However, the remaining players, particularly equity investors, showcase confidence in the sector’s long-term potential.

• The impact of these investments will be transformative but uneven. The focus on scalable, high-demand solutions could accelerate the growth of two- and three-wheeler adoption and digital platforms. However, limited investment in EV supply and infrastructure might slow down broader market penetration, leaving key areas like mass transit or heavy-duty EVs underfunded.