WHAT'S with Grab?
Already South-east Asia's most valuable startup, it announced on Wednesday that Toyota has agreed to pump in an additional US$1 billion into the ride-hailing company.
The investment - said to be the largest by an automaker in the global ride-hailing sector - has raised questions among observers about the endgame for ride-hailing players and automakers.
Grab identified Toyota as a lead investor in the ride-hailing company's ongoing financing round. Under the agreement, both players will expand their existing collaboration in "connected cars" and roll out related services such as telematics-based insurance, which could reduce the cost of insurance premiums for safer Grab drivers.
The Business Times understands that Grab has received significant interest from both strategic and financial investors. The company said: "We are not disclosing our other investors at this point but are excited by the quality of investors who are interested in partnering with Grab."
This latest investment by Toyota reportedly values Grab at over US$10 billion.
Chua Boon Ping, head of the SPH Media Fund, told BT: "If ride-hailing becomes mainstream, demand for car ownership will drop. Automakers are hence hedging their bets with ride-hailing players because if they cannot sell more cars, their business will be affected."
He said that it would thus be a logical endgame move for automakers - as strategic investors in ride-hailing companies - to sell cars to or form leasing partnerships with these companies. New joint solutions such as telematics-based insurance are a "natural extension", he added.
Observers are baffled as to where all the money Grab has raised is going. While Grab would not share how much it is raising in this ongoing round, observers pegged the sum to be US$2 billion, similar to its Series G round led by Didi Chuxing and Softbank in 2017. To date, Grab has raised over US$5.1 billion - but remains unprofitable and is not focused on an initial public offering.
Li Jianggan, chief of business consultancy firm mworks and former Asian head of Easy Taxi, told BT: "Grab is constantly raising money - and I believe they do need a good cash reserve to realise their complex ambition of being the dominant Internet and fintech giant in South-east Asia. Specifically, they will want to deter any large investors from potentially backing Go-Jek."
Go-Jek is the Indonesian-owned -and-run tech startup specialising in ride-hailing, logistics and digital payments.
Heang Chhor, managing partner at Qualgro VC, said as much: "It's likely not a coincidence that Grab's announcement comes only a few weeks after Go-Jek's announcement to deploy US$500 million towards its expansion across South-east Asia. The clear signal from Grab is that it will continue to build on its market-leading position."
Asked what the endgame is for Grab and Toyota, Lee Der-Horng, director of the NUS-LTA Transport Research Centre, said: "To me, it is the better realisation of MaaS (Mobility as a Service) by combining Toyota, the technology supplier and inventor, and Grab, the service provider."
He added that Grab is moving towards an "industrial expansion" with a focus on connected-car technologies. "It is even ramping up insurance technologies prior to stronger regulations from governments. This is a more pragmatic vision compared to Uber's flying cars. Grab really has its goals in perspective."
Notably, this is Toyota's second investment in Grab. Last year, its trading arm, Toyota Tsusho Corp, participated in Grab's Series G round. Hyundai and Honda have also made strategic investments in Grab; Grab also has a network of mobility partnerships with companies such as Drive.ai, Baidu and nuTonomy.
Globally, automakers are increasingly betting on ride-hailing. Toyota in 2016 made a strategic investment in Grab's rival Uber, whose South-east Asian operations were acquired by Grab in March. General Motors (GM) has invested in Lyft, while Volkswagen has invested in Gett.
Interestingly, Uber - valued at US$62 billion in a stock deal announced in May - is bigger than GM (with a US$61.43 market cap) and Ford (US$47.68 billion).
Asked about the implications of Uber's superior valuation, Qualgro's Mr Chhor said: "I think this shows that the market is valuing not only the revenue and growth potential of the existing core business of ride-hailing players, but also services such as delivery, payments and perhaps even the transition to autonomous vehicles."
mworks' Mr Li added: "It shows that direct and sticky access to consumers - and their data - is valued more than assets, which are becoming commodities. Automakers need to avoid being disrupted.