The start-up auto firm that promised to build Africa’s cheapest car in Thika has received undisclosed capital from US billionaire Ronald Lauder.
Mr Lauder, whose worth is estimated at $3.8 billion (Sh330 billion) by Forbes magazine, will offer Mobius an undisclosed convertible debt to help it assemble the first 50 units this year and establish a distribution network.
The cash will be provided through Lauder’s Pan African Investment Company (SPIC), which is headquartered in New York and invests in African firms that provide solutions to the continent’s problems.
The car, dubbed Mobius, will cost $10,000 (Sh870, 000) and is designed for off-roading in Africa and stripped of extras such as air conditioning, power steering and many internal fixtures.
“PIC is pleased to be working with Mobius to help create value in the company while driving job growth and entrepreneurism in Kenya,” said Dana Reed, the chief executive officer of PIC.
A convertible debt is a loan that can be turned into equity or stock ownership at a future date. Savvy startup investors prefer it because it’s a way of securing investment funds without setting a valuation on a company—a difficult process for pre-revenue company.
Ms Reed will sit in the board of Mobius Motors, the brain child of computer engineer Joel Jackson, 29, who has picked Thika-based Kenya Vehicle Manufacturers (KVM) to assemble the units.
The start-up says it has received pre-orders for Mobius and will develop an upgraded car dubbed Mobius III, which is set for production launch in 2016.
“We are excited to apply the world-class business experience of Ronald Lauder and Richard Parsons to the future growth of Mobius in Africa,” said Mr Jackson. Mr Parson is also a founder of PIC and former chair of Citigroup and CEO of Time Warner, which owns CNN.
Mr Lauder made his money from cosmetics giant Estée Lauder and served as US ambassador to Austria from 1986 to 1987.
At Sh870,000, the car is still the cheaper than new models that cost upwards of Sh2 million and Mr Jackson says the ability to buy a vehicle designed specifically for the African market will appeal to business owners in need for affordable transportation.
He told the Business Daily in March that he would start production in the quarter ending June, starting with 50 units and increasing production in 2015.
The firm, he added, will establish its showroom at Sameer Business Park on Nairobi’s Mombasa Road. But he will have to fight Kenyans’ preference for classy second-hand cars. There are currently around 800,000 cars in Kenya, with around 90,000 sold each year.
Majority of these are second-hand given that 84 per cent or 76, 122 of the new car registrations last year were used vehicles.
But Mobius is mostly targeting the transport sector in the rural areas with poor roads, hence the need for a rugged car. The car has a capacity of eight passengers including the driver and has a large loading space, efficient fuel consumption and easy maintenance.
Mr Jackson said in March he had raised millions of shillings in funding from equity investors from US, UK, and South Africa.