Last week, Dubai-based ride-hailing app Careem launched an on-demand tuk tuk service in Cairo without any fanfare. The move marked the increasing competition in the city’s transport sector where ride-hailing applications continue to pilot new services that promise to ease the hassle of getting around the Middle East’s biggest city.  

With a population of more than 25 million people and 2.3 million licensed vehicles in 2017, Greater Cairo (which includes the governorates of Giza and Qalyubia) is struggling with aggravated traffic, congestion, poor infrastructure and increasing fuel prices. And as one of the fastest growing cities in terms of population according to Euromonitor International, the problems are unlikely to disappear anytime soon.

This exacerbated transport issue has generated several ride-hailing applications looking to offer a solution.

“Any mode of transportation, whether group transport or something like Uber and Careem, of course is very well received by the ministry because anything that helps in solving the transportation problem, or lets say better eases the traffic flow and facilitates mobility is supported by the state, government and the ministry, especially group transport projects,” says Mohamed Ezz, spokesperson at the ministry of transport in Egypt.

This governmental backing has proven fruitful for the likes of US-based Uber and Careem and has spawned several local players including on-demand bus ride services Swvl and Buseet.

“Cairo is our biggest city in Careem and the biggest city in the region as well. There are around 40 per cent of Egyptians that don’t have any services that really cater for their needs. They are either forced to use public transportation or basically their own private cars,” says Hadeer Shalaby, general manager at Careem Bus.

The Need for Affordable Rides

On-demand private car hire services became widely popular when they were launched a few years ago, but the devaluation of the Egyptian currency in 2016 and the recurrent increase in fuel prices have proven an obstacle to this service as many Egyptians can no longer afford them.

In response, both Careem and Uber began introducing cheaper alternatives on their platform including their first ever bus service, using Cairo as a test-bed for their other markets. Around the same time, Buseet and Swvl also raised tens of millions of dollars in investment.

“In Egypt, rising inflation and costs for drivers have been a primary concern. For riders, Uber has launched a range of low-cost options including Uber Scooter, and most recently the Uber Bus, which is 70 per cent cheaper than UberX, and was designed in response to the Egyptian government’s request for low-cost transport options,” says Ahmed Khalil, head of operations at Uber Middle East and North Africa (Mena).

However, even with the cheaper bus services, there is still a significant share of the market that is unable to afford that. For this segment, tuk tuks and scooters are the main form of transportation.

Founded in 2017, Halan is an application that provides on-demand motorcycles and tuk tuks to the underserved communities and poorer areas where roads tend to be too narrow for cars. The company has already completed more than three million rides, expanded to Sudan and recently raised a multi-million series A funding round while securing founding Uber chief technology officer, Oscar Salazar as a board member. Back in March 2018 the company raised $2 million in a pre-series A round.

“When you live in these areas, there is a high need for these vehicles. Tuk tuks have resolved the problems of millions of people because a lot of people had to walk for kilometres to reach their destination,” says Mounir Nakhla, co-founder at Halan.  “Also, motorcycles help a lot to overcome traffic jams in big cities. In Egypt, many citizens need to use more than one mode of transportation to get to their destination. What a motorcycle does is that it takes you to your destination directly.”

Dissatisfactory Options

Cairo’s public transport sector is currently fragmented. Almost half of the city’s daily transportation needs are met by the microbuses, an unregulated network of privately-owned vehicles running several routes across the city with prices ranging from EGP1.5-3 ($0.08-0.17).

Meanwhile the government is currently working on upgrading its metro system to serve the expected 2.1 billion rides expected this year. Ticket prices now start from EGP3 but are expected to rise for a third time following a 250 per cent price hike last year which sparked protests at some stations.

The traditional white taxis, while equipped with fare metres, are notorious for drivers who refuse to use them and are seen as an overpriced option.

With such decrepit options, transportation that appeals to young, working professionals is lacking in the public sector and with a mobile penetration rate of 105 per cent according to research company, Budde, and low cost of connectivity, it is this highly connected youth segment that has led Cairo to become a market to test and scale transportation services.

“In this part of the world, there is a very big population. We have very high internet penetration and smartphone penetration. We have very diverse methods of transportation and there is a lot of room for efficiencies in these methods of transportation,” says Nakhla. “Where efficiencies can be created, that is where entrepreneurs go.”

These entrepreneurs have included Mostafa Kandil, co-founder and chief executive officer of bus-booking app Swvl who is now looking to expand globally after closing a Series B round that valued the company at close to $100 million. Kandil is now in talks with Chinese investors to fund its planned expansion to South East Asia.

Smaller player Buseet recently raised an undisclosed seed amount for its bus-booking app, while other local startups have emerged in recent years to cater to the more niche segments. Raye7 is a carpooling application, Felsekka allows drivers to offer seats on journeys from one city to the next while Fyonka offers on-demand cars for women only.

Saturation Point

But some of these new ride-hailing apps have come with their own set of problems. Frequent reports and complaints about these companies often circulate on social media with consumers facing situations where they feel that their personal safety was threatened.

Conversely, Careem and Uber also had to deal with a different kind of problem when they faced a lawsuit in 2017 filed by taxi drivers who were severely affected by the rise of these services. They complained that the two companies use private cars for commercial purposes and do not pay the taxes for operating transport vehicles. The licenses of the two companies were suspended but soon after, the court lifted the ban once both companies agreed to pay the taxes. For both government and the companies it seems, transporting Cairenes was deemed more important than ongoing legal cases.

And so competition has been sanctioned to thrive in Cairo’s transport sector. Both Uber and Careem’s bus service currently costs EGP5, their scooter service starts at EGP8 while Careem’s pilot tuk tuk service starts from EGP3.5 Halan’s tuk tuk and motorbike service are priced just as competitively. With such an array of services, the market is becoming increasingly saturated, some of the local players are betting on their niche, others are focusing on providing a unique service and creating brand loyalty, but how they will eventually compete with the prowess and coffers of Uber and Careem, remains to be seen.