Industry Insights

How local Latin American startups are enabling ride-hailing in the region

In Polymath’s recent Industry Insights article about mobility, we discussed the effects of increasing urbanization rates and population densities in Latin America and the important role that ride-hailing platforms are playing as an alternative transportation solution.

Latin America has already become a key market for ride-hailing platforms. Uber entered Mexico City in 2013, reaching 15,000 active drivers in the first year. A study shows that by 2017, the number of active drivers had grown by 5.5x to 83,000, representing ~60 percent of all legal taxis in Mexico City.

While demand for ride-hailing in Latin America has exploded, a serious problem has arisen on the supply-side: a lack of quality cars and drivers to keep up with the demand. Two key market dynamics that cause this issue are (1) a lack of access to vehicle financing and (2) incredibly high car and driver churns. Additionally, drivers don’t know how to properly manage their vehicles, both from an operational and financial standpoint, which makes driving for ride-hailing platforms financially unsustainable.

Taximo, a Polymath company with a presence in Colombia, Mexico and Peru is helping to solve this supply problem. Taximo is a car rental and financing platform that provides potential ride-hailing drivers with sustainable access to cars.

In order to offer a steady, long-term supply of cars, Taximo first had to develop a sustainable financing solution for drivers. To do this, Taximo delved deeply into driver cash flows and developed an algorithm that predicts the P&L of operating a car. The algorithm predicts both linear (e.g. re-fueling) and non-linear (e.g. car breakdown) expenses and develops a tailored financing plan that fits with expected cash flows. In cases where drivers are unable to pay a loan installment, Taximo offers refinancing options to ensure the driver doesn’t default and even offers replacement car options in cases where cars become inoperable, allowing drivers to continuously generate income.

About: mobile application available to Taximo’s drivers

Once drivers have access to a vehicle, Taximo needs to ensure that these cars are used optimally and that their operable life is maximized. To do this, the company developed a fleet management platform. The system allows Taximo to identify idle cars, accidents, stolen cars, in-pounds and even traffic tickets. Additionally, Taximo streamlines documentation processes, from insurance to required licenses status.

Taximo has integrated its systems with the APIs of ride hailing apps, allowing companies like Uber, Didi and Cabify to identify and monitor potential risks and become preventive, not reactive, to any occurrences that may deter the right supply of cars from operating.

Other startups in Latin America are actively seeking to tackle the ride-hailing supply problem. Kovi, a Brazilian startup who recently raised $10.5 million in a round led by Monashees, is a great example. Kovi is taking advantage of the lack of sustainable car financing options and explosion of ride-sharing in Brazil. Automakers sell a portion of their fleet, and Kovi handles the re-selling or rent of vehicles for ride-hailing purposes, without demanding collateral or credit.

In the increasingly dense mega-cities across Latin America, finding innovative ways to supply enough vehicles for ride-hailing will make a huge difference. Companies like Taximo and Kovi ensure access to rides for consumers and allow drivers to access and optimize income. These solutions create a dynamic sharing economy and significantly improve the quality of life of the middle class in Latin America’s mega cities.

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