Grab to add platform fee after Singapore competition watchdog drops restrictions
Its first step would be to implement relatively lower levy of about S$0.30 for its ride-hailing service in next few months
Singapore
WITH the Competition and Consumer Commission of Singapore (CCCS) releasing its two-year hold over Grab, the ride-hailing operator is now free to adjust its prices according to market forces. This could allow Grab to cash in on more of the value it has created over the past few years, observers said.
Grab's first step would be to add a platform fee of about S$0.30 for its ride-hailing service in the next few months.
Previously, the operator's price structure was locked in by anti-competition restrictions imposed by CCCS after the Grab-Uber merger.
The managing director for transport at Grab Singapore, Andrew Chan, said in a statement on Friday that this introduction of a platform fee will be "the only change" Grab will be making to its fares for at least the next six months.
So far, Grab's platform fees look to be among the lowest for ride-hailing operators in Singapore, but observers predict that higher fees might follow.
These platform fees have the potential to create a positive impact to Grab's bottom line, but it might not be enough to push them to profitability yet, said Singapore University of Social Sciences associate professor of economics Walter Theseira.
Observers told BT that the ride-hailing operator's first move of implementing a relatively lower levy of about S$0.30 could be its way of testing receptiveness. Moving forward, market competition and consumer's sensitivity to price will direct the operator's moves instead.
"Consumers who feel that the service does not justify the price can leave easily as there are other options, unlike back when Grab merged with Uber. Likewise for drivers," Prof Theseira added.
Associate professor Lawrence Loh of the National University of Singapore Business School said: "Competitors might also react to (Grab's fee increase) and push their prices down. All options are on the table now."
Platform fees are common among ride-hailing operators globally. In Singapore, Gojek levies a S$0.70 platform fee, while Ryde charges S$0.30.
In various cities within the United States and Canada, Lyft charges a service fee exceeding an estimated US$2 while Uber charges a booking fee of more than US$2 in countries including the US, Australia, Brazil and Hong Kong.
Following the implementation of Singapore's new point-to-point (P2P) transport regulatory framework on Oct 30, more operators such as Gojek, ComfortDelGro and Tada Mobility have been awarded ride-hail service operator licences.
The new regulations will ensure that all licensed operators cannot prevent their drivers from driving for other operators. It will also ensure that P2P fares are transparent and clearly communicated to commuters, while leaving fare levels to be determined by market forces.
Being a dominant player in the market could bring Grab some advantages in terms of value creation - efficiency in matching, innovation in providing new value-added services and safety. But the ride-hailing operator will need to show that these warrant the fee increase, according to Prof Theseira.
"This does not mean that the firm would be immune to market judgement, because there are alternatives today who could exploit any missteps by Grab," he added.
