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Sharing Economy

Upstart Indonesian ride-hails bet business on better driver deals

Subscription models replace commissions for many startups in crowded market

Many new players in Indonesia's ride-hailing market, like Anterin shown above, give drivers more control over fares, charging drivers a monthly fee rather than taking commissions. (Photo courtesy of Anterin)

JAKARTA -- On a typically sweltering day last month in Depok, on the outskirts of Jakarta, local journalists gathered at a tired-looking hotel for a news conference organized by Gaspol Jek, one of the latest entrants in Indonesia's crowded ride-hailing market.

Gaspol had officially launched several months before but, as is customary for Indonesian companies, wanted to hold a "grand launching." The event went off without a hitch, though not without one glaring irony: Many journalists arrived on the back of two-wheeled taxis manned by drivers wearing the distinctive green outfits of Gaspol's giant rivals, Gojek and Grab.

The reporters could hardly be blamed. Both Gojek and Grab dominate the country's ride-hailing market, especially in and around the capital. They are the way to go to beat the crushing traffic in the sprawling city. But with ride hailing set to grow threefold from 2019 to become an $18 billion sector in 2025, many investors and entrepreneurs smell opportunity. Malaysia's Bitcar has already moved into the market while Vietnam's FastGo is eager to enter.

Despite the fierce competition, Gaspol CEO Lisa Subandi was upbeat. "We will be an alternative, for both consumers and drivers," she told the Nikkei Asian Review. "Between the existing two decacorns ... we want to be an alternative that provides better income and facilities for drivers, and more affordable and safer rides for customers," she added, referring to the two green giants.

Her enthusiasm is infectious, attracting investments from old money such as Tommy Suharto, the youngest son of Indonesia's former dictator Suharto, the company said.

Still, Gaspol has its work cut out. More than 30 government-recognized domestic and foreign ride-hailing services are operating -- or have operated -- in the vast archipelago, according to an unofficial government document. Some ply regions underserved by Gojek and Grab, while others cater to niche markets. Lady Jek uses female drivers and only accepts female passengers, while NU Jek was founded by four members of Nahdlatul Ulama, Indonesia's largest Islamic organization, and operates in the group's East Java stronghold.

The large number of ride-hailing companies creates another kind of competition: attracting competent and reliable drivers. To distinguish themselves from established players, many newcomers are holding out the promise of better drivers' pay and benefits.

Startups Bonceng and Anterin, both of which began operating within the last year or so, are using a subscription-based model for drivers, rather than taking a commission of 20% like GoJek and Grab. Instead, drivers pay a fixed regular fee and keep whatever they make from rides and other services provided by the platform.

Bonceng CEO Faiz Noufal thought a different driver-payment model was needed after the massive ride-hailing driver protests of 2016. "We later figured that drivers' main complaint was the unfair commission system, which impacted their income," he said. His company charges a monthly fee of 100,000 rupiah for motorbike drivers and 200,000 for four-wheelers.

"Bonceng does not take a cut from each transaction. This means, we view the drivers as assets, not merely partners," he said.

Gaspol drivers, with their distinctive winged helmets, can receive 7% of the 20% commission on fares if they complete more than 40 rides a week. (Picture courtesy of Gaspol jek)

Anterin is running a promotion charging drivers a monthly fee of 150,000 rupiah but allows them to set their own kilometer rates. "We are more like a marketplace for users, who can choose drivers based on price, destination, vehicle type and gender," said founder and CEO Imron Hamzah. "We recognized that the problem for drivers is that they cannot set prices. This resulted in several incentive-related issues, he said. "[Few] driver incentives are good for the company, but definitely bad for the drivers."

Anterin claims to have an active fleet of around 10,000 active fleets, while Bonceng has around 5,000. Both pale in comparison with Gojek, which has two million drivers or related partners over its four-country empire, majority of whom are in Indonesia.

Meanwhile inDriver, a Russian ride-hailing service that kicked-off operations on Bali in November, uses an auction-type system. Passengers barter with drivers for rides based on price, driver ratings and estimated time of arrival.

"Instead of some nontransparent algorithms dictating the price ... [we] let users get better deals on rides, while drivers can make more money and be more flexible," said a company spokesperson.

inDriver started its Indonesia operation in August in the North Sumatra city of Medan. "We also feel that drivers don't want to have an algorithm as a boss anymore. They want to be their own boss," the spokesperson said. "We help them achieve that, since with inDriver, they can make informed choices for each and every ride and not just follow algorithmic requests."

Gaspol charges drivers the industry-standard 20% commission, but promises to save 2% of the commission in individual savings accounts set up for each driver in a partnership with state-owned Mandiri Bank. A further 7% of the commission will be returned as a bonus to drivers handling more than 40 rides a week.

"High commissions have been a complaint of drivers since the beginning [of Gojek and Grab]," said Azas Nainggolan, transportation policy analyst at Jakarta City Citizens Forum. He added that because the two are scaling back promotions, he saw a chance for new players.

Some do not share his optimism. Willson Cuaca, co-founder and managing partner at venture capital East Ventures, said, "The unit economic doesn't work out well [for newcomers]. You need lots of cash to sustain operations and reach economy of scale."

If he is right, new entrants may face a tough climb; many -- including Antercin and Boceng -- are believed to be bootstrapped, or operating with litle or no venture capital and outside investment.

The new comers need "enough funding [and] the right momentum" as the first-mover advantage is no longer there, Cuaca explained. "And they must execute within a compressed time. Based on our experience as a VC, this is hard and requires super-precise execution."

Additional reporting by Ismi Damayanti in Jakarta.

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