City-dwellers who have a short commute may find it is cheaper to use an e-hailing application like Uber than own a car.
Local fintech start-up MyTreasury.co.za, which helps South Africans find savings accounts with the highest interest rates, crunched the numbers to see when it makes financial sense to own a car or to Uber.
"If, like many South Africans, you drive less than 50km a day, using an Uber will save you money," says Michael Kransdorff, MyTreasury.co.za chief economist and co-founder.
Uber has shaken up the traditional auto industry business model of selling cars by offering customers an alternative to vehicle ownership through smartphone-based ride-hailing services. Now traditional car companies are expanding their own ride-hailing schemes, while investing in self-driving technology.
Yesterday, BMW announced it will test autonomous vehicles in Munich next year as it seeks to keep up with firms like Uber, which have spent billions on pay-per-use personal transport.
The company said Uber's rapid growth prompted BMW to consider how autonomous vehicles may help the auto company accelerate its own push into the pay-per-use transport and ride-sharing economy.
In August, Ford said it plans to offer a fully automated driverless vehicle for commercial ride-sharing in 2021. The company said it would either partner with a company like Uber or roll out such services on its own.
Google is already testing a ride-sharing application. In May, it launched a pilot programme around its California headquarters, which allowed several thousand area workers at specific firms to carpool together with users of its Waze navigation app. This ride-sharing programme is to expand to San Francisco by the end of this year.
Earlier this year, data from Juniper Research showed ride-sharing services would see revenue double by 2020. Revenue will grow from an estimated $3.3 billion in 2015, to $6.5 billion by 2020. The report found a combination of driver incentives, flexible working hours and new business models will attract more drivers to these companies.
The numbers
MyTreasury.co.za based its calculations on a Toyota Corolla, the most common car used by UberX drivers. The 1.8 Exclusive sells new for R300 900, and the car's depreciation and financing costs are around R61 000 per year. This takes into account that drivers are able to finance the car over five years at prime and sell it at the average market price after five years.
Then the company got an insurance quote of R1 500 per month (R18 000 per year) from a large South African insurer for comprehensive insurance with a minimal excess.
Other costs factored in were parking (estimated at R1 560 a year), cleaning (around R1 800 a year), petrol (R27 000 for 14 575km per year), and licences, fines and tolls (R2 000 per year).
This results in R111 000 for the annual cost of car ownership for the average South African driver.
"By comparison, all your Uber costs are variable. You only pay for what you use. The cost of taking an UberX is R7.50/km + 75c/minute. At average urban traffic conditions, we calculate an average cost per km of R9.
"We calculate that the average South African, driving 40km per day (14 575km per year), would save as much as R14 000 per year by ditching their car and switching to Uber. The real winners are those who live close to work. For these commuters, Ubering would translate into even bigger savings," says Kransdorff.
Sharing is saving
Uber South Africa hopes to bring UberPool, a car-pooling option, to the platform soon. UberPool allows passengers going from similar places to similar destinations to share a ride and split the cost.
The option is already operational in the US, China, India, London and Paris. Uber Sub-Saharan Africa GM Alon Lits says if UberPool was used by existing Uber customers, traffic into Johannesburg could be reduced by up to 800 000 cars.
Using UberPool would result in further savings as those rides are cheaper than UberX rides.
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