Rickshaws are expanding their outreach across almost all the major cities, towns and even in rural parts of Ethiopia, while at the same time pushing aside classic transportation systems such as horse-drawn carriages. Although they're not commonly visible in the inner city areas of Addis Abeba, these small three wheeled vehicles have become the face of cities and towns across the country. With a variety of brands available, demand and price are escalating. However, the market environment and competition in the industry are rapidly changing, FORTUNE WRITERS, DAWIT ENDESHAW & BEZAWIT ADMASSU report.
Anyone who is a fan of Indian movies will be familiar with the sight of the overcrowded streets of Delhi teeming with the three-wheeled auto-rickshaws, commonly known as Bajaj. They derive their name from the brand that produces them. The rickshaws are a common sight in some towns across Ethiopia as well.
Industry sources argue that this kind of vehicle first made its appearance in Ethiopia a decade ago, imported by Indian expats in Ethiopia. Bajaj made their first appearance in Dire Dawa. At the time, the inner cities and towns had transportation systems dominated by minibuses or horse-drawn carriages.
Now, rickshaws are expanding their outreach across almost all the major cities, towns and even in rural parts of Ethiopia, while at the same time pushing aside classic transportation systems such as horse-drawn carriages. Although they’re not commonly visible in the inner city areas of Addis Abeba, these small three wheeled vehicles have become the face of cities and towns across the country. With a variety of brands available, demand and price are escalating. However, the market environment and competition in the industry are rapidly changing.
The word Bajaj has become a colloquial term for the rickshaws although surprisingly, the brand’s actual existence in the market is close to invisible. It has been overtaken by market competition for the past three years. Some in the industry attribute this fact to several factors including unfair competition and intentional sabotage of the brand itself by competitors.
Bajaj Auto came into existence in India as Bachraj Trading Co Ltd in November 1945. Currently, the company distributes its products in 16 countries and dominated the Ethiopian market until 2014.
However, in 2014, the brand found itself in the middle of a court battle. Individuals and companies who were involved in the import and trading of the Bajaj brand were accused by a public prosecutor of a one billion Br tax fraud.
Dubai Auto Gallery L.L.C and Okapi Impex Plc, foreign and locally based companies respectively, were accused.
Foreigners involved with these companies were charged with engaging in an investment activity that was not allowed for foreign investors, and were accused of importing goods using the Ethiopian company as cover, without having a business license in Ethiopia. According to the prosecution, they had been engaged from June 2012, to September 2013, in the import, wholesale and retail of Bajaj rickshaws produced by their employer companies in the UAE.
In July 2016, the Federal High Court found seven individuals out of the seventy guilty. Following this court battle, the brand’s popularity stated to fall.
New brands that are now the most visible in the market, such as Piaggio and TVS, are seeing that demand is outstripping supply.
“We have close to 865 orders, registered starting from four months ago,” said a sales officer at Tagrow Business Plc, a distributor of the Piaggio brand.
“The demand on the market is far beyond the supply,” she added. These 865 people have yet to receive their three wheeled vehicles.
Established a decade ago, Tagrow used to import Bajaj brands too. However three years ago, it stopped to focus on Piaggio. At its showroom on Debre Zeit Road, it exclusively supplies the Piaggio brand. At the showroom only one Bajaj brand vehicle was parked where the sales officers were seen using it to compare to the Piaggio brand vehicles.
In addition to its presence in Addis, Tagrow has close to 100 agents and offices throughout the whole country.
“In cities like Adama, and adjacent weredas and zonal cities the market for three wheeled rickshaws is very high,” says Tsegaye Ataklti, general manager of Tagrow. In cities like Dire Dawa and Bahir Dar the market is already saturated.
“When we started the business ten years ago, it was difficult to penetrate the market,” he recalled. Those who operated traditional means of transport were not happy and saw the rickshaws as a competitor.
When Tagrow started business, their price ranged from 26,000 Br to 27,500 Br. With demand now at a high, Tagrow sells the same three wheeled passenger vehicle at 92,000 Br.
Recently, a new competitor joined the market under the brand name of TVS. Assembled by a local company called Red Star International Trading, based in Dire Dawa, the company was established in the 1990s as a local agricultural commodities trading company. Due to rising demand, the company built its assembly plant in 2013 at an estimated cost of half a billion Br. In addition to its Dire Dawa office, the company has opened 12 offices across major cities in Ethiopia.
For a driver like Yetagase Gashaw, who works in Addis Abeba’s Lafto area, TVS vehicles are the most preferable.
TVS rickshaws cost from 95,000 Br to 100,000 Br while another brands cost up to 110,000 Br. TVS rickshaws have an advantage of buying used and second hand Bajaj vehicles. Second hand vehicles usually need costly maintenance to be properly operational according to Yetagase.
As of this week, TVS rickshaws are selling for up to 106,000 Br each.
Yatagase earns from 350 Br to 400 Br a day providing the rickshaw service.
TVS is experiencing the same disconnect between supply and market demand as Tagrow. A distributor in Hawassa who sells TVS rickshaws, ran out of rickshaws and is now waiting to get a new delivery.
Last year TVS rickshaws cost 80,000 Br while this year they cost 100,000 Br each, according to Wondwossen Assefa, a driver from Hawassa. The waiting list to buy TVS rickshaws is as long as three months. In smaller towns the wait could be up to five months long.
Wondwossen is among hundreds of bajaj drivers in Hawassa. Given its topographic nature, with flat roads, the city is home to many three wheeled rickshaws.
“We are having issues finding enough spare parts for the increasing number of rickshaws,” says Wondossen.
“Customers have to wait at least three months for delivery, nothing less,” a sales officer of TVS Red Star told Fortune.
Industry sources blame the demand-supply disconnect on the shortage of hard currency that limits the import of the rickshaws.
In 2012, Ethiopia imported over 6,920 three wheel vehicles worth 267 million Br, excluding tax. Three years later, imports reached 15,600 vehicles worth 641.2 million Br. In the past 10 months alone, the country has imported 73,805 three wheel vehicles, which are worth over 817.8 million Br.
“Their demand is increasing for many reasons,” said Tsegaye. “Their affordability in terms of price in comparison to other means of transport and low fuel consumption are some of the reasons behind the rising demand.”
The average import price, excluding local transportation cost, has increased over the years. On average, the price of a three wheel vehicle in 2012 was around 66,900 Br in 2012. It now costs 73,805.
“The market in cities such as Hawassa, Dire Dawa and Bahir Dar is saturated,” explains Tsegaye. “We are now focusing on small cities and towns along Adama roads.”
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