Passengers may pay for Grab’s takeover of Uber

With Grab taking over Uber’s operations in Southeast Asia, there will be no more competition for e-hailing services using private cars in Malaysia.

By YS Chan

While there is much to rejoice for over a Malaysian startup that later moved to Singapore and competed successfully against Uber, culminating in a takeover in the region, the joy may be short-lived for e-hailing passengers, particularly in Malaysia.

In 2014, Uber entered the Malaysian market by undercutting MyTeksi, which was a taxi app for cabbies charging regulated fares – RM3 starting fare, RM17.14 per hour and 87 sen per km for budget taxis.

Instead of charging the same fares as taxis or higher, Uber offered RM1.50, RM12 and 55 sen respectively just to capture the market share, which was its standard practice globally.

If MyTeksi had protested like taxi drivers that Uber was using private vehicles to carry fare-paying passengers, it would have remained one of the other 22 taxi apps now operating in the country.

Instead, MyTeksi took the bull by the horns and emulated Uber’s business model by also offering private vehicles at competitive rates.

Passengers using Uber and Grab enjoyed much lower rates than taxis because the fares were subsidised, and these two e-hailing operators were prepared to run losses to build up their customer base.

Globally, Uber lost US$2.8 billion in 2016 and US$4.5 billion last year. Grab did not disclose its losses, which are also likely to be substantial, in order to capture 71% of ride-hailing service and 95% of the taxi-hailing service in Southeast Asia.

But with Grab taking over Uber’s operations in Southeast Asia, there will be no more competition for e-hailing services using private cars in Malaysia. Price surging will become the norm instead of being confined to peak hours.

Unless another giant transportation network company enters the local market to offer e-hailing services using private vehicles, Grab will be enjoying a monopoly.

The only saviour would be for the operators of the 22 taxi apps to consolidate and add private vehicles to their services.

But even this will not be enough, as the consortium would also have to emulate Grab by adding many other services such as parcel and food delivery, e-money services and more to build up its customer base.

If not, it will not be able to compete with Grab. If the near-term objective is profit, which was the sole aim of these 22 taxi apps when they were set up, the consortium will not survive.

YS Chan is an FMT reader.

The views expressed are those of the author and do not necessarily reflect those of FMT.