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Grab's route change meets with scepticism
GRAB is changing its course on ride-hailing to pull further ahead of the impending new competition - by rolling out more niche services and refusing to engage in a price war.
On Monday, the day Uber's app ceased to function in Singapore, Grab unveiled three new services (of which two are built on Uber's previous offerings), and affirmed that it is cutting back on rider and driver incentives.
But observers are sceptical, saying that attracting and retaining users remain the key success factor for any platform, old or new.
The changes follow Grab's acquisition of Uber's South-east Asian operations and news that at least six ride-hailing players are looking to enter the point-to-point transport arena in Singapore.
Lawrence Loh, an associate professor at the National University of Singapore (NUS) Business School, told The Business Times: "Any enhancement of Grab's offerings will certainly reduce potential new entrants. Of the current new offerings, however, two are just carry-forwards from Uber; the third, GrabCar Plus, merely fills the price-service gap between its existing regular and premium services."
The new products he was referring to are :
- GrabAssist, a service for riders with mobility needs, which is similar to uberASSIST;
- GrabFamily, a service for families travelling with children aged one to three, to be priced similarly as Uber Car Seat; and
- GrabCar Plus, a "premium economy" service featuring "better and newer" cars that are more spacious and under three years old.
Notably, the three products are the only ones of their kind in Singapore, and priced marginally higher than JustGrab, Grab's primary ridehailing service through which riders book a private-hire car or taxi.
Yang Nan, an assistant professor at NUS, commented that while the new services are mostly migrated from Uber, Grab's adding them to its stable of services is a strategic move: "Being able to offer more differentiating services is a perk of having the largest fleet, and could help attenuate the pressure of lowering prices imposed by new competitors."
On Monday, Grab showed that it was opting out of the price-war game by affirming that it will cut back on discounts for riders and incentives for drivers. It said that it has in fact been doing this for "a while" now, since before it announced its buyout of Uber's business in South-east Asia.
Prof Yang described the cutbacks as "a natural result" of the merger. "Effectively, it raises prices and damages welfare. We saw this coming when the merger was announced, didn't we?"
Prof Loh said: "Although Grab claims that the cut-downs were already in the works for some time, the timing is certainly not conducive. It further reinforces the ongoing concern that Grab is exercising its position of market dominance.
"Grab is scoring an 'own goal'. Through the cut-downs, it is softening the ground for new players to enter the market. More importantly, it may sow the seed for both riders and drivers to switch to competitors."
Of the cutbacks, Grab Singapore head Lim Kell-Jay said they were part of efforts to shift users towards a rewards system, under which riders and drivers can earn points from rides and redeem them for rewards, such as movie tickets or a Spotify subscription. "It's more exciting that way, rather than just promos."
He added that even as Grab reduces driver incentives, it will ensure that drivers' incomes - comprising fares and incentives - are maintained. "We will make sure the fares they earn continue to grow (by) giving them as many jobs as possible within the same amount of time."
On Monday, Grab came under additional pressure as ComfortDelGro said it has placed an order for 200 new taxis upon revived demand. With this purchase - its first in close to 1 ½ years - ComfortDelGro will have a fleet of close to 13,000, representing a market share of about 60 per cent.
It also signed on nearly 300 new hirers last month (twice the number of April 2017). The company also disclosed that its drivers took on nine per cent more bookings than they did last year.
Ang Wei Neng, chief executive of ComfortDelGro Taxi, said: "We have seen things settle down lately, with more drivers switching from private-hire cars, as they find driving taxis relatively more stable."
Asked if Grab is losing drivers to ComfortDelGro, Mr Lim replied: "Be it private-hire cars or taxis, drivers can choose their preferred services based on their lifestyle needs and preferences. As a tech company, our role is to provide a platform for all types of drivers, merchants, restaurant partners and financial services firms.
"In transport, all drivers are free to use our platform for job bookings, no matter which taxi company they sign up with, which fleet partner they rent vehicles from, or which bus charter company they are contracted with.
"The point-to-point transport industry is dynamic. For us, it's about using technology to enhance the overall efficiency of the transport system and working with like-minded industry players to achieve this."
He declined comment on Grab's ongoing talks with ComfortDelGro - the only taxi operator in Singapore with which Grab is not a partner; he would only say that Grab was open to working with all partners.
On Monday, the Competition and Consumer Commission of Singapore (CCCS) said it has approved Grab and Uber's appointment of British accountancy firm Smith & Williamson as an independent agent to ensure that the interim measures directions (IMD) set out by the CCCS in April are complied with by both parties.
The IMD, put in place after the Grab-Uber deal was announced, includes barring Grab from tapping Uber's operational data and preserving the fares and driver commissions prior to the acquisition.
The CCCS said the IMD seek to ensure that the ride-hailing market remains open and contestable, and will remain in place until the CCCS completes its investigation.
The half dozen new players who have in the last month expressed interest in entering the ride-hailing fray are Singapore's Ryde, Filo Technologies and MVL, Indonesia's Go-Jek, India's Jugnoo, and Malaysia's Dacsee.
Prof Loh said: "The competition scene after Uber's exit is still in a state of delicate flux. There is no lack of players from within and outside Singapore that can join the ride-hailing market.
"The technology is not the inhibitor as it is easy to set up the platform. The critical success factor is swinging riders and drivers to your side and holding on to them. Grab or any other players will have to realise this market imperative and act accordingly."