December 22, 2016 / 2:47 PM / 7 months ago

VW to launch ride hailing in Rwanda as part of Africa expansion

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FRANKFURT, Dec 22 (Reuters) - Volkswagen plans to start a ride-hailing service in Rwanda in a sign of how the German carmaker is developing pay-per-use transportation models in new markets where rival Uber has not yet gained traction.

Emerging markets with poor transportation links have become a key battleground for establishing new mobility services, with Uber competing with newer rivals like Ola, backed by Japan's Softbank, and China's Didi Chuxing.

Volkswagen, which is developing electric vehicles and new services as it tries to put its diesel emissions scandal behind it, said on Thursday said it had signed a memorandum of understanding in Kigali, the Rwandan capital.

"Volkswagen wants to strengthen its presence in emerging markets. That is why Africa ranks high on our agenda," said Volkswagen brand chief Herbert Diess.

Rwanda is seen as a good market because competition is less intense. Uber operates in several African countries, including Kenya where it launched in early 2015 and now faces local rivalry.

Volkswagen expanded into ride-hailing in May, when the German carmaker invested $300 million in Gett, a firm which seeks to outmanoeuvre Uber by refusing to apply "surge" pricing at peak traffic times.

Africa Push

Volkswagen said it had also agreed to set up a vehicle production facility in Rwanda, deepening its local manufacturing operation in Africa where it expects vehicle sales to grow by 40 percent within the next five years.

Volkswagen did not say which models it would make in Rwanda but said it would explore using electric versions of the Golf in the local mobility services business.

Volkswagen has been producing cars in Africa since 1951, when it started making the VW Beetle in South Africa.

VW this week said it would start making the Polo Vivo in Thika, Kenya. VW will also produce the VW Golf as well as several models from Seat, Skoda in Algeria from 2017 onwards.

Reporting by Edward Taylor; Editing by Keith Weir

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