Is the car financing model of Moove and Lag Ride killing the gig in cab-hailing for drivers?

Ejike Kanife
Lag Ride car costs about N8 million to N10 million. You have to pay N1.8 million for equity, between N7,000 to N11,000 for registration, then you also have to pay the standard 25% off the fares as commission…
Are car financing schemes like Moove and Lag Ride what the e-hailing space really needs right now?
A Lag Ride vehicle and a Moove car

In March 2022, the taxi-hailing space and indeed the entire transport industry of Lagos state were introduced to a new player. Called Lag Ride, the new player, backed by the Lagos state government, dived straight into the thick of things with 1,000 brand new vehicles. Its plan is to basically be a hybrid of car financing and ride-hailing company.

But the Lagos Ride Taxi Scheme isn’t the first car financing scheme to hit the Lagos transport industry, particularly the state’s taxi-hailing sector. Moove has to be one of the earliest car financing companies targetting e-hailing drivers to emerge out of Lagos. Officially founded in 2019, the company didn’t launch its services until June 2020, shortly before announcing its partnership with the taxi-hailing company, Uber, in July 2020.

But Moove and Uber weren’t the only companies eyeing the car financing space, especially as it concerns “mobility entrepreneurs” majorly comprising taxi-hailing drivers. Bolt quickly saw an opportunity it might be missing and in November 2021 launched its own vehicle leasing scheme in partnership with Metro Africa Express (MAX). The plan is to provide energy-efficient (electric-powered) cars to 10,000 Bolt drivers at a rate of $20,000 (roughly N8m at the time).

While these offerings appear very good, especially given the way the companies market them, one question that requires answers is; is this what the e-hailing space truly requires at this time? Put differently, what do the so-called mobility entrepreneurs, the e-hailing drivers think about these car financing schemes two years after the first of them started operations?

e-hailing drivers bemoan Moove, Lagos Ride and other car financing schemes

Vehicle financing companies are already here but how popular are their offerings to the average e-hailing driver out there? Speaking with me in a chat, the president of the National Union of Professional App-based Transport Workers (NUPA-BTW), Comrade Ayoade Ibrahim, said while the car financing schemes look like great ideas from the outside, several factors are inhibiting their acceptability to drivers.

The first factor is the general pricing. According to him, not only is the cost of obtaining and maintaining the cars too high, but the companies also didn’t try to get their partner app companies (Uber and Bolt) to reduce their commissions in order to help the users meet up with their responsibilities while also making enough income for themselves.

“The Lag Ride car costs about N8 million to N10 million. You have to pay N1.8 million for equity, between N7,000 to N11,000 for registration, then you also have to pay the standard 25% off the fares as commission. How many app drivers can buy a car of N10 million on credit, carry passengers on trips of N500/N1000, and still pay back and fend for themselves after paying 25%? How many years will he slave for before finally making enough money to pay for the vehicle?” he said.

Another problem drivers have with the scheme is what Mr Ibrahim calls “technical restriction”. This is simply the fact that the companies can only allow their drivers to use only their partner apps. For instance, Moove vehicles are locked into only the Uber app. Max vehicles can only work on the Bolt app and Lag Ride vehicles only work on the Lag Ride app. This severely limits the freedom and how much money a driver could make, especially for those on less popular apps like Uber and Lag Ride.

Indeed, Grace*, a Moove driver on its rental service for women, complained bitterly in a chat with me about how she practically has to run offline jobs to make enough money for herself after Moove must have deducted its weekly rental fee (N25,000). The apps are programmed to accept only online payments so all fares go to the app company (Uber) from where it deducts its 25% commission, Moove deducts its rental and other fees, and the driver gets whatever is left.

“It can be very frustrating,” Grace says. “Uber is not as common as Bolt so if you drop a passenger here, the next request you may get can be 20 or 30 minutes away. And you can’t reject rides on the rental because one of your targets is that you must complete at least 35 rides in a week. So you must go there. The 20-30 minutes is an unpaid service you do with your own fuel. And it’s not as if you get rides every time. At the end of the week, after Moove and Uber have deducted their money, I’m left with very little to go home with. It’s not worth it abeg. If I can find someone to lease me their vehicle, I’ll quickly dump this one.”

For context, the regular e-hailing guy is on both Uber and Bolt (mostly Bolt) and this guarantees steady business. With Bolt boasting at least 60% of the e-hailing market in Lagos, being limited to the Uber app means a driver’s chances of getting a trip are 60% less than drivers on both apps. This invariably means a huge loss of income.

The situation is probably as limiting for e-hailing drivers subscribed to the Lag Ride project. Aside from the technical limitation, Grace also notes that Moove puts a geographical restriction on its rental service such that it dictates to the driver which areas they can operate in. For instance she herself is locked down on a particular part of the Mainland.

I reached out to Moove* to respond to these complaints. The company told me that it restricts its drivers to only the Uber app because it needs to generate productivity data that would help it provide suitable financing products to them. That productivity data can’t be generated if the drivers are juggling several apps.

“In order for us to be able to provide our revenue-based financing products with no deposits upfront, we leverage productivity data from Uber in order to underwrite customers. This is why we require our customers to only drive on Uber,” a member of the company’s communications team told me.

The company also said it constantly reviews its product pricing to ensure that its customers are taking home a sustainable income. Grace, however, insists that at no time has her weekly fee been reviewed and she has always paid N25,000 each week. Moreover, the wording in its contract document as seen below suggests the revisions will likely be upward and the drivers will always be obliged to pay.

The company also said it is “potentially” considering removing the geographic restrictions put on its vehicles in order to improve drivers’ chances of making money.

Another problem which drivers lamented is the problem of methodology and how the vehicle companies ascribe too much power to themselves. For instance, Moove, in its contract, ascribes itself the power to deactivate any vehicle at any time for any reason ranging from non-remittance of payments as at when due to…no reason at all. And according to the NUPA-BTW president, if this happens, the driver automatically loses their initial deposit and equity along with the vehicle.

Indeed, the Moove contract made available to me shows just how much power the company wields over its drivers.

Moove ascribes itself the power to terminate the contract for no reason at all

In response, while confirming that indeed drivers who have been terminated will lose their equity, Moove said it can only terminate a driver’s contract due to gross misconduct or if they fail to meet their weekly KPIs.

“These are all made clear at the time of sign up. Again, we do not take deposits, however, it is the case that if they are removed from the vehicle due to non-performance or for misconduct, they forfeit all ‘equity’ that they’ve built up in the vehicle,” the company’s communications associate said.

Another challenge is the high cost of maintaining those vehicles. This is especially so because the company requires its drivers to turn in the vehicles for repairs with its own maintenance service provider. It is further problematic for the drivers because all expenses for any maintenance will be deducted from their account with the company not obliged to contribute anything according to the contract. 

The Lagos taxi-hailing regulation and car financing companies

Though founded in 2019, Moove didn’t resume operations in Nigeria until June 2020. It would announce its partnership with Uber the following month. Coincidentally, this was the same time the Lagos State Government was deep in serious debates with stakeholders over its much-publicized regulation for the taxi-hailing business. 

The Lagos State government finally issued the Guidelines for Online Hailing Business Operation of Taxi in Lagos State (2020) in August 2020, exactly 5 months after Technext broke the news that it was getting ready for it. A provision in that regulation mandates that only new cars, not older than 3 years old should be used for taxi-hailing in the state. 

With most of the vehicles used for Uber and Bolt business mostly tokunbo vehicles, if that regulation goes into full effect, then Uber and Bolt drivers will be forced to either change their vehicles or creating a space for those who are willing to do just that.

Because most drivers can’t afford to change their tokunbo vehicles to brand new ones, car financing companies like Moove, MAX and the government-backed Lag Rides could look to fill up that position in the value chain and make money while at it. But what do e-hailing drivers think of this?

However, NUPA-BTW president, Comrade Ibrahim thinks the Lagos state e-hailing regulation is nothing but a drive to increase internally-generated revenue (IGR) and that the government would shoot itself in the foot if it decides to enforce certain aspects of it, including the part about new vehicles.

“How many app drivers can buy a car of N10m and be carrying customers for 500?” he asks. “Yes the law has been there for years but the Lagos state government cannot activate it because we have more than 50,000 app drivers altogether in Lagos state. That’s 50,000 jobs that are at risk of being lost. With the economy of Nigeria, the state itself can’t withstand those kinds of laws.”

Grace, on her part, thinks if such a law comes into effect, then the e-hailing space would be full of slaves working for their slave drivers and taskmasters.

“With what I have seen in this my own, then people will really suffer in the hands of the companies because with all the restrictions and the way they do their business, to pay that 10 million back will be hard. Unless maybe if they allow people to freestyle, maybe then it will be okay,” she said.

In conclusion

One major effect car financing would have is the final collapse of cab-hailing as gig work. This is because nobody will be willing to invest N10 million into gig work and even if they did, the companies’ KPIs can only be achieved by a full-time driver. While many drivers have taken it as full-time jobs due to the lack of jobs, there are still many others who partake in it as gig work.

As of today, the largest vehicle financiers for e-hailing businesses are the numerous individuals who own the vehicles and who either use them or rent them out to taxi-hailing drivers.

There are roughly 50,000 e-hailing drivers in Lagos with drivers on vehicle financing making up roughly 5%. This leaves 95% of cars owned by individual financiers and these are the real competitors for car financing companies. 

Thus, can vehicle financing companies wrestle a sizeable chunk of this Lagos market?

With their current model, vehicle financing companies do not appeal to e-hailing drivers. Indeed many independent drivers who spoke to me said they are quite better off not using them, insisting they could only consider them if they don’t have any other option.

But Comrade Ayoade thinks the likes of Moove and Lagos Ride can actually compete with the independent financiers if they work closely with driver unions so as to ascertain what drivers and indeed the industry really want.

For one, he thinks the car financing companies ought to compel app companies like Uber and Bolt to reduce their commissions for drivers on those schemes. He also thinks companies like Moove, Lagos Ride and others need to allow drivers to choose which vehicles they want instead of “imposing” vehicles on them.

“Moove needs to give app drivers the opportunity to select any type of car that is good for them and their business. With that opportunity, many would key into car programs and it will be less problematic too because each app driver would go for what he can pay for. Because what they are doing now is an imposition and it’s not fair,” he said.

He also said that the platform restrictions are very crippling because they limit the opportunities to make money for their drivers who probably even need the money more than their independent counterparts who enjoy the freedom to use different apps.

But it remains to be seen whether a vehicle financing company like Moove would sacrifice its productivity data in exchange for drivers getting the ultimate proof of their productivity: more money.

*1: The name has been changed to protect the identity of the driver

*2: Moove is apparently the most popular vehicle financing scheme as such I was only able to get drivers on its platform as well as its contract. Lagos Ride comes a distant second while many of the drivers I spoke to said though they have heard of MAX, they haven’t quite seen their vehicles around.

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