Go-Jek set to challenge Grab
Grab needs no introduction: Asia’s largest ride hailer, valued at USD 11 billion. Its application has been downloaded 125 million times and GRAB recently celebrated its second billion’s ride. The playbook of the Singaporeans contains a first axe of product and service development (ride hailing, ride sharing, taxi services, payment services, food delivery,…). Grab is constantly innovating and adding services to its application, the latest being insurance for both users and drivers.
The second axe of GRAB’s strategy is geographic expansion (Malyasia, Thailand, Singapore, Philippines, Indonesia, Vietnam, Myanmar and Cambodia). Having acquired UBER in 2018, its dominant position in most of these markets is now a fact. Nevertheless, the UBER acquisition has caused some frictions with local governments; consequently, GRAB has been fined in Singapore for almost USD 10 million for anti-competition practices.
Another headache for the Singaporeans is Vietnam. Firstly, the authorities have not yet issued a permanent exploitation permit, as they want to finalise a 5-year test with various ride hailers and car sharing providers (2016 to 2021). In the meanwhile, it has become clear that GRAB is not Hanoi’s favourite: continuing issues with the roll-out of GRAB’s services in various parts of the country, pressure and intimidation on GRAB’s local partner,… In addition, GRAB was sued by Vietnam’s leading taxi company, VINASUN, for illegal practices and lost the court case in December 2018.
Regardless of these setbacks, GRAB has acquired a userbase volume that allows it to pursue its endgame: to turn GRAB into a Super-App that allows users to manage most of their lifestyle elements (trips, food, money). This is exactly what GRAB’s investors, (Toyota, SoftBank, Microsoft) appeals.
Founded 2 years prior to GRAB in Jakarta, Go-Jek initially offered motorcycle-based ride-hailing. Other services (car-based ride-hailing, but also delivery, cleaning, laundry, groceries, massage,…) were gradually added. The company, funded and backed up by Tencent and Google (amongst others), is now valued at about USD 9 billion (this includes the current USD 2 billion funding round).
Unlike GRAB, the Indonesians did not show much ambition to reach outside of its home country, until, in 2018, the company announced a USD 500 million investment in regional expansion. Go-Jek, as any other company wanting to expand in Asia, needs to comply with various and different regulations across the region. Its services in Thailand and Vietnam were approved, so was its launch in Singapore, but the Philippines rejected its entry on concerns over foreign ownership.
Go-Jek roughly follows the same roll out strategy as GRAB; start with ride-hailing and implement additional services along the way. Its focus is today on developing digital wallet solutions with local partners (DBS in Singapore, VietinBank in Vietnam).
In order to successfully compete with GRAB, Go-Jek will need market share. The company is focusing on 2 different strategies to achieve the critical mass of drivers and rides, necessary to compete with the Singaporeans. The first strategy is pricing: the end-user pricing is 10% to 30% below the GRAB pricing. In addition, the margin for the drivers is also higher and the company is known for giving better incentives than GRAB.
The second strategy to acquire volume in drivers and users, is tying up with existing taxi companies. Taxi companies are integrated into the application; GRAB has been using the same strategy in the past. Not all taxi companies are eager to join ride-hailers. Singapore’s largest taxi company, Comfort DelGro, has already declined offers from GRAB. Similarly, Vietnam’s Vinasun taxi group is actively fighting GRAB in court.
Unlike GRAB, Go-Jek has decided not to use the same brand name across the region; its name in Vietnam, for instance, is “Go-Viet” and in Thailand services are offered under the name “GET”. Also, different applications need to be downloaded in the different countries, if the user wants to benefit from the full range of local services. An awkward choice, especially considering the trend of regionalisation that is happening across South-East Asia.
The second risk is financial: in order to compete with GRAB, Go-Jek will have to steal market share from millions of satisfied GRAB users, by being cheaper for the user and giving more money to the driver. Taking into account the critical mass, this comes at a very high cost for the Indonesians and their investors. Google and Tencent better prepare for generous investments.
Also, due to its late entry in the South-Asian markets, Go-Jek has a lot of backlog compared to GRAB. Especially not being able to be present in the Philippines, one of the largest regional markets, will hurt Go-Jek. Even if the company succeeds in Malaysia, Myanmar and Cambodia, missing out on an essential market is something Go-Jek cannot afford and it will affect its market position and value.
Finally, ride-hailing companies – as successful as they might be – are, at the end of the day, puppets of their investors. The competition between GRAB and Go-Jek is in reality the competition between SoftBank and Tencent. Both have been investing in various mobility solutions across the world, aiming to gain access to lifestyle expenditure of virtually everyone.
For the Fleet Manager
It’s clear that mobility is the way forward for South-East Asia. Leasing companies have been, at best, moderately successful in countries such as Thailand and Indonesia, but their lack of innovation and old-school approach (completely inflexible) are huge obstacles for growth.
Unfortunately, even GRAB and Go-Jek have not fully explored the potential of corporate services, leaving a gap between demand and offer. It’s therefore not surprising that most corporates still buy cars and manage them in-house.
Change however will come. Not because of the creativity of the supply chain, but because the customer will push for new solutions: most fleet clients in South-East Asia are growing fast, hiring more people and requiring more mobility for their staff. Until then, the best option is to combine solutions: a GRAB Business account for your city traffic and leased or purchased vehicles for your countryside needs.