Building an electric motorcycle battery-swap network in Uganda
This article is an excerpt from The Charging Ahead – Accelerating e-mobility in Africa report by Powering Renewable Energy Opportunities.
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.
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.