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Japanese firms hopping on ride-hailing bandwagon in SE Asia
January 3, 2019 News ride hailing

 

Japanese firms are involved in a clash of titans that is expected to intensify this year between two successful ride-hailing startups in Southeast Asia.

Fierce competition is looming between Indonesian ride-hailing services provider GOJEK and Singapore based ride-hailing firm Grab, which is backed by companies such as Japanese firms SoftBank Group Corp., Toyota Motor Corp. and Yamaha Motor Co.

GOJEK is backed by Singapore’s largest local bank, DBS Bank, technology giant Google, Chinese internet services giant Tencent, Singapore sovereign wealth fund Temasek and Chinese online food giant Meituan-Dianping.

Despite their high potential, the road ahead will be full of bumps and potholes for the ride hailing sector due to anger from taxi companies that feel threatened and also the likelihood that authorities in the region will act to ensure a level playing field.

Despite the small size of its population, Singapore has been seen as a key market for ride-hailing firms due to its position as an important regional business hub and the unique condition of its transport sector where the sky-high price of car ownership has jacked up demand for ride-hailing services and electric car rentals.

The wealthy city-state has pursued a policy of curbing the number of private cars for decades to prevent the traffic snarls that have paralyzed many other Southeast Asian cities. That has made car prices in Singapore among the most expensive in the world and inadvertently turned car ownership into a status symbol.

In recent years, Singapore has taken another big step toward a really car-lite society with measures ranging from encouraging the use of rented bicycles, allowing electronic scooters on pedestrian paths and promoting car sharing to conducting trials on ahead of the possible introduction of driverless vehicles in the future.

GOJEK recently entered the Singapore market with an eye on expanding to the rest of Southeast Asia. On Tuesday the company announced that from Wednesday it will be extending its ride-hailing services to the whole island following a limited rollout last year.

Its foray into Singapore will challenge the dominance that Grab has briefly enjoyed in the Singapore market after it acquired the Southeast Asian business of U.S.-based Uber in March last year.

Not wishing to miss the boat, cash-rich Japanese companies have been scrambling to pour millions of dollars into the rising popularity of such on-demand smart phone app-based chauffeured car services.

In June 2017, SoftBank and Chinese ride-hailing giant Didi Chuxing decided to invest up to $2 billion in Grab.

A year later, Grab announced that it had struck a deal with Toyota to invest $1 billion in Grab. That investment was the largest-ever by an automaker in the global ride-hailing sector.

Recently, Yamaha agreed to invest $150 million in Grab and form a strategic partnership with it to collaborate on a motorcycle ride-hailing service in Southeast Asia with a focus on Indonesia.

Last month, Toyota and Grab further announced that the Japanese auto giant will provide “total care service” for 1,500 Grab-owned vehicles in Singapore, to be gradually extended elsewhere in Southeast Asia.

Grab, headed by Anthony Tan, the scion of a rich Malaysian family, has expanded to cover Singapore, Malaysia, Indonesia, Thailand, Vietnam, Cambodia, the Philippines and Myanmar.

The region’s ride-hailing services market is booming.

According to a report by Singapore state investment firm Temasek and Google that was released in November last year, 35 million Southeast Asians use ride-hailing services every month with eight million rides taken every day across 500 cities.

It has projected that the market for ride hailing services in the region will hit $30 billion in 2025 from an estimated $7.7 billion last year.

The trend reflects Southeast Asia’s booming internet economy, which is expected to hit $240 billion by 2025, the report said.

The two companies not only provide chauffeured car services but also a host of other e-commerce services.

GOJEK, which launched its app in January 2015 to provide motorbike delivery and ride-sharing services in Indonesia, also provides payment services, food delivery, logistics and other on-demand services, while Grab has also extended its scope to food and package delivery, mobile payments and financial services.

Aside from cars being out of the reach of most people, the popularity of ride-hailing services in Singapore is also partly due to dissatisfaction with the quality of service provided by the city’s taxis and frustration with overcrowded commuter trains.

However, ride-hailing services have become so popular that they threaten the livelihoods of taxi drivers, who have risen in protest in some countries in the region, such as Indonesia and Malaysia.

Grab was reportedly ordered by a Vietnamese court to pay compensation of $206,000 to a local taxi firm that who sued it, claiming unfair business practices.

According to data from Singapore’s Land Transport Authority, the number of taxis in Singapore shrunk from around 28,000 in 2015 to under 21,000 last year. On the other hand, the number of chauffeured private hire cars plying its roads has risen to 45,000.

The Land Transport Authority told Kyodo News by email that it is “currently reviewing the regulatory framework for the point-to-point sector, to ensure that both street hail and the ride-hailing market remains open and competitive.”

It said the new regulatory framework will also prohibit driver exclusivity arrangements, to ensure that drivers are free to choose which operators to drive for, reduce entry barriers for new operators and facilitate more options for commuters.

Grab’s aggressive local expansion has ruffled some feathers, with its acquisition of Uber’s Southeast Asian business prompting the government to intervene to level the playing field for potential competitors, while Singapore’s competition watchdog fined the two companies a total of S$13 million over their merger.

Ride-hailing services have provided a lucrative source of livelihood for thousands of people in the region.

However, the road ahead for them may get bumpy.

Singapore has charted a plan to create a super high-tech public transport sector by complementing its dense commuter train and bus systems with autonomous vehicles, which may remove the need for human drivers altogether.

It regards this as a necessity rather than luxury because a government White Paper projects that the city-state’s population will rise to 6.5 million by 2030, up from 5.6 million now.

But that will take some time as these autonomous cars are still being tested and changes to certain laws will be needed before they can be allowed to freely ply Singapore roads.

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