M&A always on the radar as bigger players ‘tend to win’: Grab COO Alex Hungate
He stresses that greater scale is crucial to making money in the competitive, low-margin ride-hailing market
[HO CHI MINH CITY] While South-east Asia’s largest ride-hailing platform, Grab, remains focused on organic growth, strategic acquisitions are always on the radar as the company looks to scale faster and bigger – essential for its market dominance and profitability, said Alex Hungate, the company’s chief operating officer.
At an economic summit hosted by Bloomberg Businessweek Vietnam in Ho Chi Minh City on Friday (Nov 14), Hungate acknowledged that rumours about a potential Grab-GoTo merger and acquisition (M&A) have occurred several times over the past six years.
“If the opportunity to grow faster through M&A comes up, then that’s something we will always look at,” he said.
“But the bar for that would have to be very high for us to use our shareholders’ capital, because the organic route (in Indonesia) is doing very well.”
Singapore-based Grab holds the lion’s share of Indonesia’s ride-hailing market at over 60 per cent as at 2024, data from Euromonitor International showed.
Grab’s takeover of GoTo could value the Indonesian tech giant at US$7 billion and give the combined entity a market share of over 91 per cent in South-east Asia’s largest economy. It would also have a similar dominance in Singapore.
Density is “winning formula”
At the Ho Chi Minh City event, Hungate said that the acquisition of Uber’s regional operations in 2018 sped up Grab’s growth in South-east Asia. The deal entailed the exit of the US ride-hailing player from the region, in return for a 27.5 per cent stake in Grab.
“In our business, the margins are very small, and therefore to make money, you’ve got to be very big,” he said, adding that in the global on-demand and digital platform sector, bigger players “tend to win”, while smaller ones usually get consolidated.
“The density part is a winning formula, (which allows you to) reduce prices and then increase the demand.”
Grab said it has around five million registered driver-partners on its global platform, while Gojek – GoTo’s ride-hailing arm – employs more three million drivers across the South-east Asian region.
The Competition and Consumer Commission of Singapore (CCS), the city-state’s competition watchdog, said on Friday it has not received any notification of decision from either Grab or GoTo on a proposed merger, based on a report by The Straits Times.
The commission stated, however, that it remains open to engaging with the parties and emphasised that voluntary mergers are permitted under Singapore law, provided they do not violate the Competition Act.
CCS previously fined Grab and Uber a combined S$13 million, after confirming that their merger in 2018 had led to a substantial lessening of competition.
Hyper-localisation or exit
Grab’s strategy in South-east Asia has centred on hyper-localisation and adapting to the region’s diverse markets – a key factor in the company’s success in beating rivals such as Uber, Hungate added.
Meanwhile, GoTo’s Gojek has been struggling in various markets.
It exited Vietnam last September due to increased competition, focusing instead on gaining profitability in its core markets of Indonesia and Singapore.
It also withdrew from Thailand in 2021 and, in late 2023, ceded control of its loss-making e-commerce unit, Tokopedia, to ByteDance’s TikTok in a US$1.5 billion deal.
Nonetheless, GoTo has in recent years significantly narrowed its net losses and posted profitability in certain business segments. It reported positive earnings before interest, taxes, depreciation and amortisation (Ebitda) for the third straight quarter in Q2 this year.
Nasdaq-listed Grab also posted an annual Ebitda profit on an adjusted basis for the first time in 2024, though the business still reported an overall loss.
EV shift intensifies in Vietnam
The market in Vietnam is presenting another challenge for Grab.
Hanoi and Ho Chi Minh City are planning gas-powered motorbike restrictions in the coming year, and market leaders such as Grab, home-grown player Be and e-taxi company Xanh SM – which runs the largest ride-hailing fleet of VinFast electric vehicles (EVs) – are now playing the role of enablers for the ambitious mobility transformation.
While Grab is supportive of this transition, Hungate cautioned against moving too quickly, emphasising the need to balance the practical needs of infrastructure and supply, as well as stable incomes for drivers.
“You need catalysts like VinFast to actually move the critical mass and get society to shift to EVs sooner rather than later,” he said.
He noted that Grab has rolled out EV options for its services in Vietnam, as well as partnered local e-bike makers such as Selex Motors and Dat Bike to meet the growing demand.
“We want to put pressure on the transition... but it’s important we do it together at the right pace,” he added.
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