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Volkswagen Opens Plant at Rwanda to Tap Ride-Sharing Market

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Volkswagen AG has opened its first assembly line at Rwanda’s capital Kigali, per Reuters. The facility has been opened to tap the demand for ride-sharing services in the region.

Volkswagen has made an investment of $20 million, which is expected to create approximately 1,000 jobs at the manufacturing hub. The first model manufactured at the plant was the Volkswagen Polo. In the first phase, the German automaker aims to reach a production target of 5,000 units by manufacturing other models, including Passat, Tiguan, Amarok and Teramont. The components required for vehicles manufactured in the facility are shipped from South Africa via Kenya.

In Rwanda, the company has initiated a car-sharing service to compete with its counterparts in Kigali. Volkswagen aims to utilize these domestically-built cars to operate its car-sharing system, apart from selling to customers in Rwanda and adjoining countries.

Volkswagen AG Price and Consensus

For a country with 12 million people, Rwanda has quite a low-level of car ownership. Since 1997, around 200,000 private cars have been registered, per a tax-collection body of the country. Moreover, most of the cars that run on the roads of Rwanda are second-hand vehicles, imported from Japan.

With the global drift toward app-based car services instead of buying vehicles, Volkswagen expects to tap the growing demand and expand in the Sub-Saharan Africa region by launching its ride-sharing service in Rwanda, a country where the major rivals of the company have not arrived yet.

Price Performance

In the past three months, Volkswagen’s stock has moved down 15.7%, underperforming 5.8% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Volkswagen has a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are General Motors Company (GM - Free Report) , Toyota Motor Corporation (TM - Free Report) and Ferrari N.V. (RACE - Free Report) . General Motors carries a Zacks Rank #2 (Buy) while Toyota and Ferrari sport a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

General Motors has an expected long-term growth rate of 5.5%. Shares of the company have risen 15.8% over the past year.

Toyota has an expected long-term growth rate of 5.7%. Shares of the company have risen 21.8% over the past year.

Ferrari has an expected long-term growth rate of 17.3%. Shares of the company have risen 57.3% over the past year.

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