Landing the next big deal in UAE ‘mobility’

Dubai: Is the UAE’s next $1 billion value company taking shape in the mobility space? Or will the $3 billion plus that Uber paid to acquire Careem early this year be just a one-off?

A handful of relatively new entrants have been rolling out tech-enabled services that deliver a user to his destination of choice, or make sure his vehicle is put through its regular maintenance checks. And it’s not just limited to cars – e-scooters too have been getting a lot of attention for what the industry calls the “micro-mobility” needs of residents.

It’s all happening in the UAE… and there’s already much that could interest future investors in such businesses. It’s not as far-fetched as it sounds – who would have thought that a local startup (Careem) offering ride-hailing services stood a chance against a global major (Uber) and in a city where there multiple taxi fleet operators when it launched in 2012? A $3.1 billion cheque to the founders in 2019 would have silenced any recurring doubt.

New gaps to fill

And it does seem there’s always some need or the other that needs plugging in the business of mobility. Carasti has launched a car subscription app for an “all-inclusive” monthly fees. It could mean the use could take out a Kia Picanto for Dh1,400 a month or a Prado for Dh4,000. And it also gives users discounted rates for longer term bookings.

13604678-dbe3-46e7-8c2e-84fa900caa4cSome would say it’s the same as any service offered by a rental car company. But Claudio Esposito-Aiardo, founder of Carasti, begs to differ… politely, of course.

“We support dealerships, rental car companies and leasing companies to increase the utilisation of fleets – therefore it is not a capital-intensive business model (for Carasti),” said Esposito-Aiardo, who worked in Google back in the day. “We simply help a traditional brick-and-mortar automotive business access new digital customers.

“We believe the “mobility-as-a-service” sector is only just kicking off in the UAE; there is so much room for growth and innovation.”

He estimates that the business will see a return on investments in under two years. Carasti has been privately funded to date, and “We will be looking to raise funding in 2020 to help scale across the GCC and beyond,” said Esposito-Aiardo.

There are two other app-based car rental companies, ekar and udrive, which have been picking up the pace in terms of user acceptance. They offer cars for hire by the day or less, and where users get to pay by the minute.

These business models are built on the premise that a newer generation of users would much prefer the ride hiring or hailing part rather than actually buy a vehicle. (The consultancy McKinsey expects nearly 30 per cent of the global automotive industry’s revenues by 2030 coming from subscriptions and other “shared mobility” recurring revenue models.)

But there are other models where vehicle owners form the core of the user base.

Get ‘em serviced

ServiceMycar.ae offers maintenance checks and repair services for its users, whether they connect through the website or an app. The business operates a network of garages that are “all checked, vetted, qualified and insured to carry out a service up to agency standards,” said Ozair Puda, CEO. “We have over 80 workshops in our network and the labour rate is set at Dh150 per hour. Our plans for 2020 are to expand into Saudi Arabia and Oman.”

There are service providers who believe that a significant volume of business exists among vehicle owners who have gone past the warranty coverage offered by the dealership. Or those owners who look to cut down their regular maintenance costs by taking the vehicles to third-party garages.

Based on Puda’s feedback, his business is growing at rates of 20-30 per cent a month. “We expect to see profitability by end 2020 or the first-half of 2021,” he added. “What’s offered do not add to the cost of any vehicle service.”

Here come the e-scooters

New digital ways to lease a car or get it serviced may be seen as a natural progression of the UAE’s mobility market. But the emergence of businesses offering e-scooter-based services comes across as a sudden swerve into a new territory.

But is there a chance that this can develop into something mainstream? “Micro-mobility is proving to be a mass market service for the region,” said Jaideep Dhanoa, co-founder and CEO at Circ MENA. “Almost every community or area has a need for efficient short-distance transport solutions. These can be to enable journeys as a first- or last-mile connection to public transport and parking lots, or as a point-to-point solution to nearby places of interest.

“Our research has shown broad take-up across all ethnicity. While half of our users are between 25-35 years, a third are 35 plus. We are all looking for affordable and convenient mobility options, and it is these dimensions that are being best addressed by micro-mobility, especially for short distance rides which make up 50 per cent of all city trips.” (Dhanoa says that Circ is now the most downloaded travel app the UAE for both iOS and Google Play “despite our current presence in only one emirate (Abu Dhabi)”).

Sceptics would point to the searing temperatures for five to six months of the year as a factor that could impinge on demand. Dhanoa counters this: “All markets are exposed to (weather) seasonality… the Middle East is no different. However, unlike the rain and snow of winter in Europe, in the Middle East it is far more feasible to ride in summer heat with a breeze in our face.

“Micro-mobility offers affordable pricing that makes a material impact on lower-income consumers, especially those who are walking and using public transit even in summer.”

What next?

If or when any of these businesses tap funds for their next round of investment or expansion needs would be a good time to gauge their performance. And this will also provide a barometer on how well new ways of mobility are adapting to the UAE marketplace.

Keep in mind that Careem was valued at $2 billion in 2018… from there to a $3.1 billion “sold” tag in March of 2019 proved to be a short ride.