With over 100,000 three-wheelers taxis on the road in Dar Es Salaam, Tanzania, locally know as tuk-tuks, transitioning the transportation market to e-mobility stands not only to improve the financial stability of drivers, but to benefit local communities by reducing noise and improving air quality.
For self-employed taxi drivers in Tanzania, a significant portion of daily income is allocated to vehicle rental and fuel costs for their petrol-powered tuk-tuks. Once these expenses are accounted for, drivers are left with a minimal take-home wage, leaving them caught in a vicious cycle.
TRī, an early-stage electric mobility company founded in 2021 by Niko Kadjaia and Kunze Peng, aims to break this cycle. Its mission is to make e-mobility affordable and accessible to Tanzania’s professional drivers and improve livelihoods by providing a cost-effective three-wheeler solution. These electric vehicles offer significant fuel savings, effectively doubling drivers’ daily income. Equipped with state-of-the-art speed chargers, TRī’s vehicles can travel up to 200km per day, alleviating the range anxiety that taxi drivers, who traverse the city multiple times a day, often feel, and that can be a barrier to adoption of electric vehicles.
In December 2022, TRī received PREO funding to test and validate its financial and operational models. The company set out to explore the financial viability of a B2C lease-to-own scheme, ensuring they could properly vet and manage customers. Additionally, they aimed to evaluate different approaches to battery charging and test the safety and reliability of their vehicles on the road.
By August 2023, the project was complete, and recently, PREO interviewed TRī to glean insights from the valuable lessons learned during implementation and to hear the company’s ambitions for scaling up beyond Dar Es Salaam.
Q: What were your original goals with PREO funding, and did you achieve them as intended?
We set out with three primary objectives.
Our first objective was to identify our business model and market fit, which involved rigorous testing both of our financial and operational models. Initially, we planned to implement a lease-to-own model. However, in July 2023 we secured our manufacturing license, which allowed us to exempt our vehicles from import duties. This pivotal development enabled us to offer our entire solution—vehicles, batteries, and chargers—at retail prices competitive with internal combustion engine (ICE) vehicles. Strategically, gaining our manufacturing license prompted us to pivot towards a retail strategy focused on B2B partnerships with importers and distributors, rather than direct B2C sales.
Operationally, we demonstrated the reliability of our batteries through extensive testing in real-world conditions. Out of the 80 batteries tested, only three exhibited motherboard issues which were solvable, and another three had easily addressed plug issues. This confirmed that our batteries are safe for use, even withstanding the challenging environmental conditions in Dar es Salaam. Our operations are fully integrated into an IoT platform, allowing us to collect user-specific information and insights for daily decision-making. We also achieved a minimum asset availability rate of 70%, which serves as an indicator of both product reliability and workshop effectiveness. Based on the quality of our products and our workshop team, we aim to achieve an asset availability rate of 80%.
Our second objective, preparing TRī for a seed round, was the only objective we intentionally did not achieve. This decision was made in alignment with our existing investor, Persistent Energy. The rationale was simple: we chose not to raise a new round in an environment where overall investments into the continent were falling by 39% year-on-year – a trend dubbed by the industry as “The Funding Winter.” This would have most likely led to an unfavourable company valuation and significant dilution.
Our third objective focused on networking and positioning TRī as a reputable player in the African e-mobility ecosystem. Despite opting for a low-profile communications strategy, we achieved notable milestones. We secured a seat among four private sector representatives advising the Tanzanian government on regulations to accelerate electric mobility adoption. This advisory group, led by the Tanzania Commission for Science and Technology (COSTECH), held its inaugural meeting at the beginning of 2024. We were also able to win a tender issued by the Dar Rapid Transit Agency (DART) to develop charging infrastructure for electric two- and three-wheelers. Finally, we participated in key panel discussions during the Africa E-Mobility Week in Nairobi in both 2022 and 2023, garnering significant coverage in leading national and international media outlets such as BBC, CNBC, and The Citizen.
Q: You tested multiple lease-to-own programmes for electric tuk-tuks. What challenges did you face in rolling out the lease-to-own product offering, and how did this experience shape your longer-term approach to customer financing?
We tested a lease-to-own model but faced challenges in finding a scalable solution. We did, however, adjust our Know-Your-Customer process several times to improve our customer vetting before confirming a lease. In our efforts to enhance, we explored various methods, such as subscribing to a database for credit scores from one of Tanzania’s accredited bureaus, implementing survey-based psychometric tests, and collaborating with the Bolt Operations team to identify vetted drivers who meet specific revenue thresholds.
As mentioned before, we do not think that we have found a scalable formula yet. As a result, we’ve decided to limit our customer base to the existing twenty contracts and are considering phasing out the offering in the future.
Q: In developing charging solutions for a novel electric tuk-tuk, TRī considered battery swapping. How would this impact the customer experience, and what operational insights led to the decision to discontinue these approaches?
As a general approach, we let customers tell us what they need. When we first looked at introducing electric three-wheelers and the readily available options at the time, suppliers recommended a single, technically swappable but operationally cumbersome battery pack weighing over 60kg. Because electric three-wheelers were novel to the Tanzanian market and consumer preferences had not yet been established, we opted against the advice from our suppliers and installed two, lighter (<30kg per pack) and easier to handle battery packs instead of one. This gave customers the choice to swap the batteries or charge them without removing them from the vehicle.
We observed two interesting trends: initially, customers appreciated the flexibility of swapping or removing batteries for charging at home. However, over time, consumer behaviour changed. Customers started buying extension cables to avoid removing the batteries for charging. After six months of operations, we surveyed 14 customers and found that 10 preferred charging without removing batteries, 2 were indifferent, and only 2 valued the flexibility of swapping. Today, nearly all our customers charge without removing batteries from the vehicle.
The main reason customers didn’t like the swapping is convenience; they found it time consuming to remove batteries. Plugging a single cable into a socket or charging station was deemed safer and more convenient. Responding to this established preference, we intensified efforts by introducing our first charging stations and modifying the battery design for our second model, the E2. This model features a single large battery pack and a straightforward charging cable that easily connects to any conventional socket or power outlet.
Q: What did you learn from installing solar panels on the tuk-tuks? What challenges did you face from customers or the environment, and what advice would you give to your peers considering similar tests?
Our hypothesis around solar tuk-tuks was simple: by adding a solar roof we could increase the range by 20%, based on supplier specifications. However, we can now confidently reject that hypothesis, as we only achieved a 5-10% increase in range. Supplier specifications typically reflect results under ideal conditions rarely met in real-world scenarios.
We quickly realised that this modest increase in range came with an unnecessary product complexity, leading to higher breakdown rates and increased maintenance needs. The additional cost of installing the solar system was $200, translating to an extra $20 per kilometre for the added range. Given the cost trends of LFP cells and the efficiency of our current electrical system, the solar solution proves to be nearly 40% more expensive per kilometre than simply increasing battery capacity.
We concluded that while solar tuk-tuks may seem appealing in presentations, they are not practical for real-world applications.
Q: Aside from charging, what challenges did you encounter in driving adoption of your solutions?
The biggest challenge was also the most obvious one: the initial price point of our solution was 50% higher than an internal combustion engine (ICE) alternative. The need to decrease this difference led to the decision to test a lease-to-own sales model. A change in regulation, exempting our vehicles from import duties, alongside the re-introduction of a previous regulation, exempting our solar batteries from import duties and VAT, plus better cost control of our bill of material, resulted in a reduction in the landed costs of our solution. We have since been able to offer our entire solution at retail price parity with ICE three-wheelers.
Another challenge was the unpredictable enforcement of regulations. There weren’t any supporting regulations in place when we started our commercial operations. Even after the introduction of regulations, proper enforcement was not a given. Together with our clearing agent, we had to appeal several times against the import duty and tax assessments issued by the Tanzania Revenue Authority (TRA) when clearing our different consignments. This included face to face meetings with the Commissions of Customs, the Tanzanian Bureau of Standards (TBS) and others. As of today, we can proudly say that we have set the precedent in Tanzania for importing completely knocked down electric three-wheelers at zero percent import duties and fully registering electric three-wheelers with all relevant bodies to make them eligible for road use.
Q: What have been the benefits from your solutions to TRī customers in terms of savings and convenience? And how has focusing on charging affected TRī economics?
When it comes to savings, our customers have been able to reduce their cost per km by up to 90%. Where 100km would cost our customers on average 20,000 TSH (approximately £6) they now spend only 2,500TSH (approximately £0.75) on electricity when charging at home.
The biggest difference in economics between swapping and charging lies in the working capital needs. We sell our batteries and do not keep them in our books. By doing so, we do not have to factor in the depreciation of assets (vehicles and batteries) and can better improve our gross margins. We have had positive gross margins since deploying our first vehicle and are focused on continuously improving them. We aim to reach a gross margin of above 30% by the end of 2025.
When it comes to convenience, our customers are most happy about our automatic transmission. Before, our customers would have to pull the clutch hundreds of times a day, now they can simply turn the key and start driving. Interestingly, the reduction in noise pollution was not as important to our customers as it was to their passengers.
Q: What were the key takeaways from this project for your company? What lessons would you share with the sector as a whole?
Generally speaking, building a startup in Africa follows a very different playbook than building one in the US, Europe or Asia. This is especially true when it comes to funding and the speed of execution. Less than 1% of globally available venture capital funding is allocated to Africa. Grants and debt funding play a much more important role to African startups than they do to their counterparts in the US, EU and APAC. This resulted in a steep learning curve as acquiring these types of funds and managing the respective partners is new for us.
In addition to the overall funding gap, we also had to manage a personnel gap. Due to the nature of the electric mobility ecosystem on the continent, there simply aren’t enough people that have relevant experience in both the e-mobility space and the startup space. On-the-job learning is much more prevalent, which slows down execution. The combination of funding and personnel gaps results in the need for patient money, which makes projects like PREO so important.
Beyond these general issues, we were also able to gain valuable insights into our customers to improve our offerings and business model. We discovered that whilst lease-to-own generated 65% of our total revenues (20 active vehicles), 35% of our revenues were generated by direct sales (6 vehicles). Factoring in administrative and refurbishment costs associated with the lease-to-own scheme, the retail scheme allowed for better cash flow management and had higher gross margins. This was a strong indicator for an overall more stable business model. Despite the positive results the direct sales produced, we also cannot ignore the challenges associated with it. The biggest being the speed at which we were able to sell the vehicles. We only sold 1 vehicle per month on average, and we have not been able yet to optimise our general revenue cycle.
We have concluded that our biggest strength as of today is in building a product that is attractive to the market. So, focusing on R&D is the best allocation of our resources. With this change in strategy comes the shift from B2C to B2B, outsourcing the acquisition and management of end consumers to third parties.
Q: What are TRī’s plans going forward? How do you expect electric tuk-tuks to evolve in Africa and for TRī?
The biggest change in strategy is the move from a pure B2C focus to switching to B2B. By having been able to close a strategic partnership with our suppliers in China, we can now effectively operate as an Original Equipment Manufacturer (OEM). This allows for better control of margins and opens up the way to target importers and distributors rather than the end consumer.
With this comes our increased ambition to move a greater part of our value chain to Africa. We plan to build our own battery assembly line with the next step of building our own vehicle manufacturing line in 2025. Establishing this will allow for further production cost optimisation and an increased supply chain stability. Being able to produce key components locally reduces the dependency on foreign supply chains. Looking at the sector at large, we’re convinced that it will attract more funding but also an increase in competition. Climate tech had a significant share in overall funds received in 2023. E-mobility in particular saw first signs of scalability as players like Spiro, Ampersand and Gogo were able to deploy vehicles by the thousands. This increases investor trust in the sector. With more established players, a better understanding of business models and more stable supply chains, we expect to see a more widespread adoption of e-mobility. This will attract more Indian and Chinese OEMs, who have a substantial understanding in the development and mass production of electric vehicles and their supporting infrastructure.