Egyptian market remains promising as ride-hailing services face new transport regulations

 

Following a global trend, the expansion of ride-hailing companies in Egypt has skyrocketed. Firms such as San Francisco-based Uber and Dubai-headquartered Careem, which was acquired by the former in late March 2019 for $3.1bn, have taken advantage of Egypt’s large population and increasing smartphone penetration to expand across several of the country’s largest urban centres. However, opposition from traditional taxi businesses has raised the profile of the two firms and triggered not only a legal battle, but also a regulatory response from the government. The result has been a set of new operating fees and licensing rules for the two ride-hailing companies.

Despite the added operational costs, the process has also brought legal recognition and the possibility of continued expansion in a dynamic market with rising potential. With a fast-growing and young population of 97.5m, and ongoing urban expansion, mobility has become a challenge in some Egyptian cities. Greater Cairo in particular, where some 20m people live, see daily traffic jams in most of its main thoroughfares.

A May 2014 study by the World Bank, for instance, found that congestion in the Greater Cairo region cost an annual 3.6% of Egypt’s GDP. Other competitors in the mobile app-based transport segment have been attracted to the Egyptian market’s potential. In 2017 Estonian firm Taxify and Cairo-based start-up Swvl started operating in the capital.

Transport Dispute

The challenges for the appbased transport companies began in 2017, when a group of 42 Egyptian taxi drivers filed a suit against Careem and Uber. The suit was based on the claim that the two firms were registered in the country as call centres, and that they were allowing the use of private vehicles as cabs. In June 2018 Egyptian authorities ratified a new law regulating the operations of ride-hailing applications in the Egyptian market. The new law has established boundaries for the new transport players. It will require ride-hailing companies to pay LE30m ($1.7m) for an operating licence, which is expected to be valid for a period of five years. Companies will also be required to pay 25% of their operating licence upfront, and pay the balance in instalments over the remainder of the operating period. Under the new regulation, drivers working with ride hailing app companies will be required to procure specific licences.

Egypt has become Uber’s most significant market in the MENA region, and one of its top-10 performing markets in terms of the number of trips. The company began operations in the country in 2014, and as of late 2018 had 90,000 regular drivers. Uber’s commitment was further underlined with the company’s announcement that it would invest $100m in the Egyptian market over the coming five years.

Innovation Drive

The new law seems to have galvanised both Uber and Careem into an innovative drive that has the potential to improve mobility options for Egyptians. In December 2018 Careem announced the launch of its bus-booking service in Cairo. The app will allow users to book rides on the company’s 13-seater buses along a number of routes, with prices expected to be 60-70% cheaper than that of Careem’s private car service. Uber is also launching its own bus service in the Egyptian capital which will rely on the city’s local bus providers, and as of late 2018 had also started its Uber Scooter service based on its application.

With innovations in the app-based transport business model expected to continue, the daily reality of commuting in Cairo will be the ultimate test for the sector. One of the main challenges is rising fuel prices, which is pushing commuters not only to ride-sharing services but also to other innovative modes of transport. “While electric vehicles (EVs) are often seen as a distant future in Egypt, there is growing interest in them due to the rising cost of fuel,” Mohamed Badawy, CEO of local electric car firm Revolta, told OBG. “About 80% of the EVs imported in 2018 were sold outside of Cairo, which suggests that it will not just be a trend for Cairo’s elite.”

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The Report: Egypt 2019

Transport chapter from The Report: Egypt 2019

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