Matatu investors eye electric buses but are wary of unforeseen shocks

Public transport stakeholders board a BasiGo bus at Kencom, Nairobi, during a sensitization tour on January 19, 2023. [Samson Wire, Standard].

Investors in the matatu industry are warming up towards electric mobility.

The electric transport space has been opening up in the country in line with global efforts to cut carbon emissions.

Two Kenyan e-mobility companies - Basigo and Roam, have introduced electric vehicles (EVs) into the market and are keen to enter the public service vehicle (PSV) space.

Matatu Operators Association (MOA) chairman Christopher Muia says that top of his list of why he'd bet on investing in electric mobility is value addition. He's, however, keen on the costs involved to see if the venture can break even fast.

"This is a good concept and plan which is also eco-friendly. As a businessman, whenever you get an opportunity to invest, just grab it," he said.

"It's a new product, so we want to understand the servicing, the charging of the vehicle and charging stations and spares of the vehicles."

Roam and BasiGo both offer to charge services to their customers. While BasiGo, sells the bus upfront through the banks, Roam sells on a lease-to-own basis, within four to five years.

Other concerns expressed by investors from the Matatu sector include the cost of purchase.

"With where the economy is right now, and interest rates from the bank, if you were to put in deposits or look for finances for such a bus, it might not be viable," said MOA Secretary Kenneth Munyui.

Munyui urged EV assemblers to look for ways of bringing down the cost of a bus, for example.

For instance, Roam (OPIBUS LTD) sells its vehicles on a lease-to-own basis, the initial cost of the vehicles is about Sh16 million.

"The idea is good, but the cost of the bus is way too high. They should engage the government on issues like value-added tax (VAT) and excise duty," Munyui said.

He noted that when the cost of the bus is high, insurance goes up too.

"They are insisting on comprehensive insurance, which has been a major impediment to our investments," he said.

BasiGo's batteries. BasiGo's objective is to address the urgency of the climate crisis, and revolutionise public transport by making it more accessible. [Samson Wire, Standard]

Munyui said that despite the initial cost, he is willing to invest in electric mobility owing to the volatility of fuel prices witnessed in the last few years.

"The cost of fuel keeps going up. As we speak, matatu operators are working for oil companies because nearly 60 per cent of our collection is going to fuel, not forgetting the issue of spare parts," he said.

Kenya National Bureau of Statistics (KNBS) data shows that the matatu industry generates over Sh200 billion in revenue with about 70 per cent of Kenyans relying on matatus.

Earnings from road passenger traffic were estimated at Sh349 billion in 2017.

George Githinji, a businessman and chairman of OMA Services Limited, a matatu operator, said that the idea of electric mobility is a noble one.

"It makes business sense owing to the high fuel prices. Ultimately, any business person is looking for something that is efficient, less tiresome and less prone to mechanical problems and profitable," said Githinji.

The buses are single transmissions, and do not have an engine but instead, use a mortar.

Also, they doesn't have an air filter and there is no oil change. These buses run on battery which can cover about 250km on a 4-hour single charge. They also have a trained technical team to service the buses at night.

Githinji says he has already ordered vehicles from BasiGo and is eager to see how the venture will turn out.

"I want to convert into electric buses because it is a new experience and the mathematics is adding up correctly and it seems profitable. The return on investment is a plus," said Githinji.

Githinji says that compared to diesel vehicles that are predominantly used in the matatu business, electric buses have low maintenance costs.

Unlike Munyui, for Githinji, the amount invested is not a problem, as long as he can recoup back his investment.

Matatu owners association also estimates that there are 200,000 Matatus in Kenya with 20,000 Matatus in Nairobi and 53,629 PSV licenses issued by the NTSA.

BasiGo and Roam's objective is to address the urgency of the climate crisis, and revolutionise public transport by making it more accessible.

Matatu Operators Association (MOA) chairman Christopher Muia. [Denis Kibuchi, Standard]

According to Samuel Kamunya, the head of business development at BasiGo, for every 280km, electric vehicles consume electricity worth Sh2300. This, he says, is far much lower that the Sh7000 worth of diesel that would be consumed in the same distance.

Bus operators also asked the assemblers to negotiate with relevant authorities to come up with fixed tariffs for electricity consumed by e-buses.

The operators also raised the question of installing solar panels on top of the bus as a way to save energy that would in turn be used to charge the battery and cut their electricity costs.

This call was however disputed, assemblers said that the solar panels on the bus can only account for about 5 per cent of the power, which is not enough to charge the battery.

A KNBS data shows that Traffic congestion in Nairobi costs the economy Sh100 billion annually, the average travel time within the Nairobi Metropolitan Area and the CBD is 57 minutes, ranking the city fourth among the world's most congested cities in the world.

BasiGo currently has three charging stations, the battery lasts up to five years which is an equivalent of 600,000km, and costs Sh8million.

The bus dealer which currently has 17 buses in the country is also projecting to have 100 buses by end of the year and 1000 buses by 2025.

"We are attracting matatu operators so that in their next buying decision, there is an option of an electric bus. We are therefore making it accessible and affordable," said Kamunya.

"We make it accessible by introducing a finance model dubbed 'pay as you drive.' Electric buses have very high upfront expenditure, we are giving out a subscription model of Sh20 per km, that way the bus becomes affordable. With the Sh20 we are able to service your bus, charge it, maintain the bus and take care of the battery for you," he added.

BasiGo sells the bus but still operates the charging of the battery. "The charging infrastructure is expensive, you have the bus but don't know where to charge, that is where we come in after selling the bus to you. The cost of technical expertise is also high, so we do that for you, you own the bus but we ensure the bus works for you," explained Kamunya.

Basigo which now has 25-seater buses that go for Sh5.8 million is planning to bring 33-seater buses in the next month and projects local assembling by end of the year to make the buses more affordable.

The company which is looking to scale, says that the challenge they face is on capital expenditure, and have not recovered from the global logistics challenge as a result of the pandemic.

Kamunya noted that the rise in electricity prices does not affect them as much. "The rate at which electricity goes up is negligible compared to how alternative fuels go up".

Roam, which entered the Kenyan market in 2018 and started retrofitting is now assembling locally.

According to Felix Eningsjo, project head at Roam, as compared to diesel, roam buses have lower operating cost, zero noise pollution, requires less maintenance and have local support after-sales service.

"The buses are designed for the Kenyan market, the chassis is assembled locally and the body is built in Kenya. The preferred time of charging the battery is night time, for slower charging which is sufficient. Daytime charging is rapid," he said.

Roam's project head also noted that for every Km, operators save Sh35 which is an equivalent of Sh1 million per year.

Eningsjo expressed his concern that one of the risks they have to deal with is what to do with the batteries when they run out. "These are going to be many batteries in 5 to 10 years, we don't want them to be dumped in the landfill, we are talking to companies that can recycle this," he said.

Roam aims to manufacture about 50 buses monthly.