Trans-cab acquisition risks giving Grab monopolistic pricing power
I refer to the article “Grab acquires taxi company Trans-cab” published in The Business Times on Jul 21, 2023.
Although BT’s article was written as if it were a done deal, The Straits Times wrote that the acquisition “will still need approval from the authorities”. I hope the authorities will very seriously assess the implications of the proposed acquisition for consumers – in particular, the risk that it will confer further monopolistic pricing power on Grab.
Prior to the introduction of ride-hailing to Singapore by Uber and Grab in 2013, Singapore’s taxi service – an arguable public good – was one of the most regulated industries. To ensure service availability, taxi drivers were even required to clock minimum mileages.
Astonishingly, with the arrival of Uber, Grab and later, Gojek, regulations painstakingly crafted over decades were seemingly considered irrelevant, with most discarded to accommodate the ride-hailing platforms.
In their early years, Uber and Grab – which have since merged – adopted seemingly predatory practices such as big upfront fare discounts, subsidies to drivers and very low fares. These were predatory in the sense that they were unsustainable, and perhaps meant to make it difficult for traditional taxi drivers to compete. Many taxi drivers gave up and became Uber or Grab drivers.
But what has happened in recent years? Fares have gone up significantly. In periods of “surge” pricing, it is not uncommon for fares from the Central Business District to Changi Airport to double to S$50 to S$60, among other examples.
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Notwithstanding this, Grab is still making losses. Its FY2022 adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) was a negative US$793 million, following a negative Ebitda of US$842 million in FY2021.
The question then is how much more Grab fares will need to go up, before it can make a reasonable return on the many billions invested – and most importantly, what that will mean for the fares consumers have to pay.
I hope the authorities will very seriously assess the implications of the proposed acquisition of Trans-cab by Grab. Taxi service, by whichever name you call it, should still be considered a public good. The authorities must ensure this remains reasonably affordable and prevent the concentration of monopolistic pricing power.
Ho Swee Huat
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