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Uber pullout eases strain on Southeast Asia's top taxi operator

ComfortDelGro sees bookings climb as ride-hailing price war subsides

Singapore-based ComfortDelGro has made new fleet investments since Uber and Grab announced their Southeast Asian tie-up.    © Reuters

SINGAPORE -- ComfortDelGro, Southeast Asia's largest taxi company, is regaining momentum after ride-hailing provider Uber Technologies exited the region in a deal with local rival Grab.

On Friday, the company will announce results for the April-June quarter, the first reporting period since the Uber-Grab merger. After recent signs of expansion, the results will be closely watched.

"Now it is back to normal," one ComfortDelGro driver told the Nikkei Asian Review in early August, adding that he takes more riders since Uber ended its service in the city-state in May.

With a fleet of about 12,500 cars, Singapore-based ComfortDelGro controls 60% of the taxis here.

When Grab reduced user promotions amid less competition that Uber's pullout left behind, ComfortDelGro apparently captured some customers, who started comparing the ride-haling app's fares against those of traditional taxis. Thanks to new incentives, such as discounts for people booking via ComfortDelGro's app during off-peak hours, it received 9% more taxi bookings in May from a year earlier, the company said.

The recent tail winds for ComfortDelGro have lifted its stock price. Since March 23, one trading day before Grab and Uber announced their deal, its stock had climbed 19% as of Wednesday, outperforming the benchmark Straits Times Index's 3% drop during the same period.

Meanwhile, the taxi company in May placed an order for 200 new cars to welcome drivers switching from Grab and Uber. "The purchase of new taxis and bookings growth are signaling the worst is over," according to a report by Singapore-based Phillip Securities Research.

ComfortDelGro earnings worsened in tandem with the spread of ride-hailing services. Net profit for the January-March period plunged 20% on the year, marking the fourth consecutive quarter of decline. According to the Land Transport Authority of Singapore, the number of private-hire cars in the city-state jumped 47% during 2017 to around 46,900 cars.

Before that, ComfortDelGro had enjoyed steady earnings growth, reaching record net profit of 317 million Singapore dollars ($232 million) in fiscal 2016.

The competition from ride-hailing apps reached a turning point in March, when Grab and Uber announced a regional merger. As part of that deal, Uber ended its service in eight Southeast Asian countries by May.

Singapore's antitrust watchdog has also in effect helped conventional taxis. As a part of its efforts to maintain competition in the ride-hailing market after the Grab-Uber merger, the Competition and Consumer Commission required them to inform Uber customers and drivers that migration to Grab's app was "purely optional."

ComfortDelGro itself has continued to counter ride-hailing operators through innovation. While it created its own booking app, which lets users rate drivers, it also accepts Alibaba Group Holding's Alipay and other mobile-payment methods. Moreover, it partnered with Uber last December, enabling users to book ComfortDelGro taxis on the Uber app.

The focus now is whether ComfortDelGro can sustain growth. Grab sometimes offers far cheaper fares than traditional taxis. For example, a ride from Singapore's centrally located Tanjong Pagar area to Changi Airport on Thursday evening cost SG$16 with Grab, whereas the same fare was estimated at SG$24.50 to SG$31 with ComfortDelGro if using its app.

In addition, the company must still contend with limited room for growth in Singapore's mature market. Moreover, the expected entry by Indonesian ride-hailing leader Go-Jek would pose a new threat.

Faced with these prospects, ComfortDelGro has pursued overseas acquisitions. The company said on Tuesday it bought two Australian bus businesses for a total of 134 million Australian dollars ($99 million), in a bid to diversify its geographic exposure. Singapore accounted for 63% of its total revenue in 2017. Other than Singapore and Australia, the company operates ground transport businesses in the U.K., Ireland, China, Vietnam and Malaysia.

ComfortDelGro is slated to announce April-June quarterly results on Friday after the close of trading in Singapore.

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