HANOI -- Ride-hailers Grab and Go-Jek have a new competitor in Vietnam: an amalgamation of smaller taxi companies aiming to win passengers back from the disruptors.
Three Hanoi cab operators have banded together to form G7 Taxi, instantly creating the largest taxi business in the capital. The new entity has been able to undercut the fares of Grab, at least over short distances, and it may be looking to bring still more players into its group.
The arrangement has the potential to further shake up the transportation market in the fast-growing economy of 95 million people, where smartphones are ubiquitous and there are few public transport options besides buses.
G7 was formed in October by Thanh Cong, Ba Sao, and Sao Hanoi. Together, they have about 3,000 cars, accounting for around 20% of taxis in the Hanoi area.
The G7 base fare is 9,900 dong (0.42 cents) for the first 1 km, while Grab charges 20,000 dong for the first 2km. Grab may be a better deal over long distances, but G7, like other traditional taxi operators, does not charge extra on rainy days or during rush hour.
Thai Huyen Nga, a 44-year-old office worker in Hanoi, said she recently switched from Grab to G7 because she finds it cheaper.
Although joining forces entailed some initial costs, such as changing the liveries on the cars, economies of scale have allowed G7 to keep fares low.
In a recent interview with Nikkei, G-7 Taxi President Nguyen Anh Quan said he thinks Grab benefits from an uneven playing field.
Quan said the three companies joined forces because it was becoming "increasingly difficult for any one of us to counter Grab." He said G7 can "win back passengers by introducing integrated systems, slashing costs and cutting fares," adding that the company is in talks to bring other operators on board.
Before they teamed up, annual sales at the three companies had declined by 10% to 15% on average over the past few years. A number of companies were in the red, and some went under: Quan said Hanoi now has 70 companies, down from 115 in 2010.
In Quan's view, the taxi companies' struggles stem from restrictions that work in favor of ride-hailers. "While taxis are required to install lamps that identify the companies," he said, "cars used for ride-hailing have no such lights and can run on urban roads where taxis are prohibited."
Quan believes rivals like Grab should be obligated to install meters and set up call centers as well.
The taxi trio is not alone in pushing back against the ride-hailing industry. Mai Linh, Vietnam's No. 1 taxi operator, has developed a smartphone app similar to Grab's, which displays nearby cars and driver ratings along with expected arrival times and fare estimates. Customers can also choose a motorbike, a regular four-seat passenger car or a seven-seater.
Going a step further, Mai Linh has set up a hotline so customers can hail its taxis even when they have bad reception.
Despite running 15,000 cars almost nationwide, Mai Linh has been struggling to fend off Grab. The company laid off 6,000 drivers in the first half of 2017, or 20% of its total, according to local media reports.
Second-ranked Vinasun launched a ride-hailing service using Facebook's Messenger app, enabling customers to hail cars and make complaints and requests directly, much like Grab. About 58 million Vietnamese use Facebook and many use its Messenger app; Vinasun opted to use the social network in the hope of generating a word-of-mouth effect.
Still, the company has had a difficult time, too. Vinasun expects its full-year sales to drop 33% on the year in 2018.
Taxi operators have lobbied the transport ministry to clamp down on ride-hailing apps, to little avail. The crowded field includes not only Grab, which absorbed the Southeast Asian operations of U.S. giant Uber Technologies, but also major Indonesian competitor Go-Jek, which launched services there in September. Local operators including Aber and FastGo are competing as well.