Entrepreneurship Zone: 03 April 2023 :: Building an electric motorcycle battery-swap network in Uganda

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Entrepreneurship Zone: 03 April 2023 ::  Building an electric motorcycle
battery-swap network in Uganda

 

	
 




Zembo, founded by Etienne Saint-Sernin and Daniel Dreher in 2018, is a
startup selling electric boda bodas (motorcycle taxis) across Uganda.
Drivers swap discharged batteries for fully charged batteries at one of 27
battery-swap stations operated by Zembo and pay for the energy consumed.
Zembo has since expanded to 30 employees, spread across Lyon, France and
Kampala, Uganda. The team has employed an additional 45 employees across its
battery-swap stations who work as ‘battery swappers’.

Uganda has an estimated 700,000 motorcycle taxis and a green grid: 90% of
Uganda’s national electricity generation is from hydropower. Uganda also
does not subsidise the fossil fuel industry, which means high end-user
prices allow the electric mobility market to be competitive. Leveraging this
opportunity, Zembo aims to build, own and operate the nation’s largest
swapping network while selling electric motorcycles.


Zembo’s business model


Zembo sells electric motorcycles on a pay-as-you-go basis to boda boda
drivers and provides battery-as-a-service (BaaS) through a network of
battery-swap stations. Zembo’s target customers are boda boda drivers, as
the battery-swap model ensures higher savings for those who use the
motorcycle more intensely – as well as higher revenues for Zembo’s swap
stations. According to an environmental and social impact assessment by
Zembo, regular Zembo drivers earn up to an additional US$7 per week, 50%
more compared to internal combustion engine (ICE) motorcycle taxis.

Zembo’s battery-swap service is the infrastructure needed to make electric
mobility a viable transport alternative in Uganda. At a battery-swap
station, a driver pulls up and removes the battery for the swapper to scan
the QR code on the outside. The swapper then selects a charged battery from
the station and scans it before placing it in the driver’s motorcycle. With
the batteries identified, the difference in energy levels is then calculated
and drivers are charged for the energy. The swap is done in just two
minutes, making it as convenient as topping up fuel at a gas station.


Zembo’s bet on charging infrastructure to grow electric mobility


Zembo’s core scale-up strategy involves building and owning a pan-national
network of swapping stations, providing charging as a service to Zembo
drivers and to drivers of other electric mobility companies. The 27 charging
stations comprise 20 on-grid stations, three solar-hybrid stations and four
off-grid stations. Zembo is rapidly expanding the lower-cost on-grid
stations while implementing hybrid stations in areas with particularly high
demand. Solar-powered off-grid charging stations are placed in areas without
grid access. Zembo aims to complete a nationwide network of recharge
stations, including off-grid areas, beginning by connecting major urban
areas with roadside stations.

Urban hybrid stations combine the advantages of two power sources: the grid
is generally available during the night while solar can bring down
electricity costs and compensate for power cuts during the day. Implementing
swap stations with solar in off-grid areas is challenging because of the
need to provide recharged batteries at all hours and in all weather
conditions. This means stations must either provide less service during
sunless hours or scale both solar panels and energy storage, which is
CAPEX-intensive.

A scenario analysis modelled with 500 electric motorcycles swapping at the
existing 27 stations found that off-grid stations and hybrid stations are
more profitable at operational level than the on-grid stations. This is due
to the high unit cost of grid electricity (US$0.21/kwh) and fixed staff cost
for the swappers, which is 55% of direct costs involved in operating a swap
station.



 

Zembo operates a network of recharge stations where batteries are charged.
As soon as their battery is empty, drivers swap their empty battery against
a recharged one.

To improve swap station unit economics, Zembo is testing out two
innovations: franchising swap stations and using battery-swap cabinets.

Franchising swap stations would allow Zembo to eliminate labour and rental
costs and instead negotiate directly with franchisees over revenue sharing.
Battery-swap cabinets can take these savings a step further by reducing
battery storage space from several shelves to a standalone cabinet. This
would allow them to be placed in commercial establishments instead of
requiring a dedicated storefront. It would also automate swaps after initial
manned operations, creating a smoother experience for drivers and
considerably reducing labour costs. Zembo is exploring partnerships with
agent networks such as Copia by offering the opportunity to provide extra
income to independent shop owners with a franchise model.

Zembo plans to expand its motorcycle fleet to more than 2,000 motorcycles
and 60 swap stations by 2025. This will include 30 on-grid, 20 hybrid and 10
off-grid stations, to provide dense coverage within Kampala and routes
between cities, and on the periphery.


Increasing the batteries deployed to overcome battery quality challenges
results in higher capital intensity


The main challenge faced by Zembo is battery quality. Capacity of its
existing batteries is decreasing faster than expected, leading to a shorter
range per battery, which causes inconvenience for drivers. More than half of
its batteries in operation are severely impacted, particularly the earlier
battery batches. Zembo has retired the first batch of batteries and is using
three sequential batches on the road: BH3, BH4 and BH5. After using a BH5, a
driver is charged the full amount for a full charge. BH4 and BH3 battery
swaps are priced with 10% and 20% discounts respectively, reflecting the
reduction in battery capacity faced by the earlier batches.

To overcome the above hurdle, Zembo has increased the numbers of batteries
available on its network, shifting from a 145% battery-to-vehicle ratio to
226%. Zembo is further mitigating these battery challenges by sourcing
batteries from different suppliers from India and China, and has brought in
an initial batch of batteries from Aceleron, a recyclable Li-ion battery
assembler in Kenya. But increasing the battery-to-vehicle ratio has also
resulted in higher capital intensity and a delayed payback period on storage
assets.


Fostering public and private partnerships to bolster growth


Zembo raised US$3.4 million at the end of 2021 from Mobility 54 – a
corporate venture capital subsidiary of Toyota Tsusho Corporation and CFAO
group – DOB Equity and InfraCo Africa to scale its operations in Africa.
Zembo is now testing out operational partnerships that can help drive
further growth and improve unit economics.

One of Zembo’s key partnerships is with Untapped, a financier of
income-generating smart assets that generate data about the asset use and
income generation. Untapped purchases the loan asset through a revenue-share
model, in which the monthly repayment from the borrower is shared with the
productive-use company. The partnership helps remove motorcycle loan assets
from Zembo’s books and allows Zembo to focus on its core product of
battery-swap stations. So far, Untapped has bought 83 motorcycle loans from
Zembo.

Zembo is also engaging with public sector building agencies such as
Uganda’s Ministry of Science, Technology and Innovation to build policy, and
is pushing for attractive electricity rates for electric mobility. To create
demonstration effects, Zembo has sold motorcycles to Kampala Capital City
Authority, which will also open a swap station in Mengo Hill.

Combining operational partnerships such as with Untapped with using
franchised battery-swap cabinets can significantly improve the unit
economics for Zembo’s battery-swapping network. This would support Zembo
drivers by keeping swapping costs low and paving a smoother road for all to
electric mobility transition in Uganda.



A Zembo electric motorcycle

 

- Howwemadeitinafrica

 

 


 


 


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