Grab looks to avoid a price war with ride-hailing rival Go-Jek as it focuses on safe, reliable services

  • Singapore-based Grab is on track to raise US$3 billion from a new funding round
  • Grab teams up with Mastercard to expand its reach in payment services
PUBLISHED : Monday, 29 October, 2018, 6:35am
UPDATED : Monday, 29 October, 2018, 8:37am

Singapore consumers eagerly awaiting a price war to erupt between ride-hailing giant Grab and Indonesian rival Go-Jek, which is poised to enter the city next month, should not hold their breath.

Grab plans to take a cautious approach and push to further improve its services, rather than drive up subsidies, as competition with Go-Jek intensifies in its home market and across Southeast Asia, company president Ming Maa said in an interview at the China Conference organised by the South China Morning Post in Kuala Lumpur earlier this month.

“We do not believe that winning customer heartshare and mindshare is driven by subsidies,” he said. “It’s driven by providing them good service and a good product.”

The 41-year-old Maa, who joined Grab two years ago from Japan’s SoftBank Group Corp, said the Singapore-based company spends significantly less on subsidies “by a very, very wide margin”, citing its track record against Uber Technologies before their merger in March this year.

In Singapore, a preview of the clash to come between Grab and Go-Jek

Maa’s comments come after Grab and Uber were slapped a combined S$13 million (US$9.4 million) fine last month by Singapore’s antitrust watchdog for anti-competitive behaviour as a result of their merger, which had effectively made Grab the city state’s dominant ride-hailing player with about 80 per cent market share.

The Competition and Consumer Commission of Singapore found that Grab’s exclusivity deals with taxi companies, car rental partners and even some drivers had hampered other ride-hailing players from expanding in the city state, while prices for Grab services increased. So apart from the financial penalty, the commission instructed Grab to dismantle its exclusive partner arrangements as well as restore its pre-merger pricing algorithms and commission rates.

The expansion of Go-Jek in Singapore would make the city state its second international market after launching in Vietnam last month. Go-Jek has been in talks with Comfort-Delgro, Singapore’s largest taxi operator that previously had an exclusive deal with Uber, according to a report by news site TechCrunch earlier this month.

Go-Jek did not immediately respond to an emailed request for comment at the time.

Maa dismissed concerns that Go-Jek’s imminent arrival in Singapore would adversely affect Grab’s business in its home market, saying that Grab “loves competition”.

Grab, founded by Anthony Tan and Tan Hooi Ling, is currently Southeast Asia’s most valuable tech start-up, with Didi Chuxing, Uber and SoftBank among its major shareholders.

“Competition is good for the industry, it makes us stronger and helps us develop better products and services,” he said.

How Grab’s CEO steered it from a garage in Malaysia to Southeast Asia’s most valuable tech unicorn

“We’ve been blessed to be able to compete with the best of the best – Uber. That experience taught us a lot.”

Grab may need to fall back on that experience as it is locked in a heated battle for market share across Southeast Asia with Go-Jek.

Jakarta-based Go-Jek, founded by Nadiem Makarim, started as a motorcycle ride-hailing service in 2010 in Indonesia, but it now offers everything from meal deliveries to over-the-counter medicine and massage services on-demand through its super app. The company earlier this year announced plans to expand into Thailand, Vietnam, Singapore and the Philippines to challenge Grab’s dominance in the region.

Both Go-Jek and Grab are also building up their war chests to help drive their respective expansion programmes in the region.

Go-Jek steps up rivalry with Grab as it expands in Southeast Asia

Go-Jek aims to raise about US$2 billion from a new funding round with its existing investors, according to a Reuters report last month that cited unnamed sources. Those backers include Tencent Holdings, Temasek Holdings and Warburg Pincus.

Maa said Grab is on track to raise US$3 billion from investors that include SoftBank, Toyota Motor Corp and Microsoft by the end of this year.

“When you look at our competition, many of them take short cuts because they’re chasing after metrics to show how fast they’re growing … One such short cut is fraud,” Maa said. “These types of short cuts are tempting to do, but we do not do that.”

Without elaborating, he said some of Grab’s rivals have up to 50 per cent fraud on their platforms.

Still, Grab has come under fire for raising fares and reducing promotions, following its merger with Uber’s Southeast Asian operations.

Grab was also hit by a backlash in July when it announced changes to its loyalty programme, devaluing points earned by users over the year with “immediate effect”. The backlash prompted Grab to postpone certain changes till the end of September, giving users more time to claim rewards at the previous rate.

In a Forrester report released earlier this month, Grab was criticised for changes that appeared “heavy-handed and arrogant”, sparking unhappiness in both customers and drivers alike.

“Grab triggered an explosive emotional reaction that undermined its market position and spread like a virus,” the report said. It added that the company was not ready to venture into other businesses like payments and food delivery.

Maa acknowledged that Grab could “always do better” in improving its user experience, adding that the firm has a “laser focus” on providing sustainable, safe and reliable services to both its passengers and drivers.

Singapore ride-hailing giant Grab expects to double revenue in 2019 as it integrates Uber’s regional ops

The company has already branched out from ride-hailing to payments, food delivery, logistics and on-demand grocery orders.

On Thursday, Grab announced a partnership with Mastercard that could help further engage its users. Grab will offer its 110 million users the option of using either a virtual or physical prepaid Mastercard issued via its app. The move will give millions of users who are underserved by banks, or are unbanked, with a means to buy products and services online, not just within Grab’s ecosystem but at any merchant that accepts Mastercard.

The initiative will be rolled out within the first quarter of the next year in Singapore and the Philippines, with plans to expand it to the rest of Grab’s markets by the end of 2019, the company said.