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Episode 51 of the BIG5D Podcast, features a conversation about using the subscription model to help South Africans gain access to automobiles in a non-traditional manner with Tinashe Ruzane, the co-founder and CEO of FlexClub.
FlexClub helps South Africans access vehicles when they need them on a pay-as-you-go basis (they partner with major car rental platforms in South Africa).
Given the price of cars is high and access to financing is very limited, the demand signals are there for the company. Tinashe, a former head of vehicle solutions at Uber, co-founded FlexClub in South Africa in 2019 with Marion Gallardo and Rudolf Vavruch.
FlexClub is trying to plug a gap in the market. Many South Africans need a car. Few can afford to buy one outright. By one estimate, more than 75% of new car models now cost more than R500,000 in South Africa. Plus auto loans are very difficult to come by for most South Africans. In this environment, demand for alternatives to car ownership should find purchase.
FlexClub is addressing this gap. And Tinashe says it does so with a hybrid of renting and leasing that emphasizes affordability.
“When I talk to folks that are familiar with the construct of renting a car and leasing a car, I'd say it's somewhere in between,” Tinashe explains in the episode.
“It doesn't have the rigidity of leasing, but it definitely doesn't have the price point of short-term rental. So it's something between where you get an economic price point with the flexibility of shorter-term access.”
FlexClub does not offer car-sharing (a model familiar in the United States via platforms like ZipCar). First of all, that use case is very short term — often measured in hours. FlexClub is trying to offer a workable alternative to leasing or owning a car, where the need goes beyond needing a car to shop at Pick n Pay on a Saturday afternoon.
Tinashe tells us that 3 million South Africans apply for a car loan every year. Yet South Africa only sells half a million cars each year. And the majority of these are financed.
“If you look at the statistics from banks, banks decline 70% of applicants,” Tinashe says in the episode.
“So only 30% of applicants, people who want a new car in South Africa and are looking at financing, are going to get the car. That doesn't mean that the other 70% shouldn't have gotten a car, but it does fundamentally change their experience.”
Tinashe says FlexClub sees so much opportunity to expand its footprint in South Africa rather than pursuing geographic expansion within Africa (let alone beyond) isn’t on the short-term roadmap.
An opportunity Tinahse does see happening in the near term is partnering with brands to use FlexClub’s subscription network to launch services.
“We launched FlexClub as a consumer brand to demonstrate the power of the underlying platform. And the next step in our evolution that you'll start to see more and more of is brands building their own virtual subscription network on top of our platform.”
Here is an example of such a partnership between FlexClub and Zeda.
Five Things We Learned
Here are our five key takeaways from this conversation with FlexClub’s Tinashe Ruane.
South African Tinashe began thinking about the challenges in the African mobility space while head of vehicle solutions EMEA for Uber while based in Amsterdam.
FlexClub operates in a difficult environment for accessing vehicles for purchase. More than three-quarters of new cars in South Africa cost more than R500,000 and 70% of car loan applicants are turned down by South African banks.
Younger adult consumers who eschew the notion of car ownership are a key segment for FlexClub. Yet 20% of FlexClub users have existing car loans. These users rely on FlexClub to access vehicles for additional family members, etc.
A common understanding among FlexClub users is that cars are more like utilities than assets, given the rate at which they depreciate. In this context, a car subscription may make more sense than car ownership.
FlexClub sees offering its subscription platform to brands as a more logical direction for the company than expanding to other geographies in Africa.
You can also listen to this episode on your favorite podcast apps.
Recommended Reading
The following is a curation of content from around Africa, the Middle East, and the world related to big tech, digital marketing, small business, startup life, venture funding, M&A, and more. Please vote with your clicks to tell us what we should curate for you in future editions.
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