Singapore taxi giant challenges Grab with ride-hailing trial
Ride-hailing firm Grab is "confident" of meeting the digital banking licence requirements that include "a path towards profitability" on a five-year projection, the unicorn told The Business Times on Thursday. PHOTO: ST FILE. Sketched by the Pan Pacific Agency.
SINGAPORE, Feb 3, 2021, Nikkei Asia. Singapore’s largest taxi operator ComfortDelGro on Wednesday started a ride-hailing pilot to supplement its fleet of cabs as the company bets on increased use of land transport to boost its business, Nikkei Asia reported.
Called a “beta trial” the venture will start with a small number of private hire cars for the operator to test reception to the service, letting transport users select options through its taxi booking mobile application.
“We will be conducting the beta trial with 25 private hire car drivers and we will review as we go along,” Tammy Tan, group chief corporate communications officer at ComfortDelGro told Nikkei Asia.
The batch of 25 vehicles is a relatively small fleet, compared to the company’s 10,000-strong stable of blue-liveried taxis on the city-state’s roads, but marks the start of a challenge to Singapore-based super app and technology unicorn Grab’s ride-hailing segment.
Grab, for its part, once grew as a ride-hailing operator but later incorporated more businesses into its super app strategy of offering a one-stop mobile portal that provides a variety of digital services.
Last year, it also won a Singapore digital banking license through a consortium with Singapore Telecommunications, which the company expects to further unlock business opportunities in the lucrative local financial sector.
ComfortDelGro’s business, however, is still heavily centered on transport as a core revenue generator. It bills itself as “one of the world’s largest land transport companies with a total fleet size of over 41,000 buses, taxis and rental vehicles.”
The company also runs light and heavy rail networks in Singapore and aside from its home market has overseas operations in Australia, China, Vietnam, Malaysia, the U.K. and Ireland.
The test program is not the first time ComfortDelgro has flirted with ride-hailing. It previously teamed up with American operator Uber through an arrangement that allowed the Singapore company’s taxis to be booked using Uber’s platform.
But Grab had the last word and ComfortDelgro’s deal fell through after the tech startup acquired Uber’s Southeast Asia business in 2018.
In turning to ride-hailing again, ComfortDelGro decided to offer commission fees for booking jobs that were “lower than the current market rate,” according to the company, and will be inviting more drivers to come on board its platform as demand grows.
The taxi operator did not publicly reveal what those commission fees were when it announced the ride-hailing initiative.
Currently, its app lets transport users choose a “taxi or car” option in booking a ride. But that means consumers will still likely be served most of the time by conventional cabs, given the small batch of 25 private hire drivers plying the roads versus the thousands of taxis.
The diversification of ComfortDelGro’s services comes as Singapore is set to crank up its economy this year following a difficult 2020 due to the coronavirus pandemic.
After an explosion of virus transmissions earlier last year that ripped through densely-packed dormitories housing foreign workers and sent Singapore’s case numbers surging toward the 60,000 mark, the country has managed to keep a lid on domestic infection spikes.
ComfortDelGro’s business suffered as its markets saw various forms of lockdown last year to stem COVID-19 transmissions, keeping people at home and reducing usage of transportation.
The company’s taxi segment posted an operating loss of $10.8 million Singapore dollars ($8.1 million) in the third quarter of last year, compared to an operating profit of SG$27.4 million in the same period the year before.
In a business update in November, ComfortDelGro said that with the resumption of more economic activities in Singapore, cab ridership had recovered to 80% of pre-COVID levels.
By creating its new ride hailing offering, the company will be able to compete more effectively against other apps that provide the service, Jan Ondrus, associate professor of information systems at business school ESSEC Asia Pacific, told Nikkei.
“Potentially, this move could be good news for private drivers and passengers, who could financially benefit from more competition,” Ondrus said.
“As there will be more traffic on ComfortDelGro’s app, more passengers might choose to leave Grab for ComfortDelGro for their next ride,” he added.
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