Uber, Grab and Go-Jek in ride-hailing battle in Southeast Asia

• Uber may have to step up investment in the Association of Southeast Asian Nations (Asean) in the face of aggressive subsidies and ad spending by local players or risk falling behind, FTCR survey data suggest.
• Jakarta-based Go-Jek is likely to maintain its lead in motorbike ride-hailing in Indonesia, the region’s largest market. This will support its attempts to make Go-Pay the largest e-payment provider in the region, although it faces competition from banks and telecoms companies.
• Singapore-based Grab is expanding most aggressively in the region and presents a threat to Uber in the car-hailing segment, as well as to Go-Jek in the motorbike segment.

The Asean ride-hailing market is still immature and has complex national and regional characteristics. But it is set to grow in revenue to $13bn in 2025 from just $2.5bn in 2015, according to a recent study by Google and Singapore state investment company Temasek. This provides a big opportunity for local and international players.

While global aspirant Uber has abandoned its attempts to crack China — selling its business there to rival Didi Chuxing in August last year — the company is keen to push into Asia’s other emerging markets. Yet while Uber is reportedly willing to spend $1bn to compete with Ola in India, less is known about the resources it is willing to devote to Asean.

Our recent surveys in five key Asean economies suggest Uber will need to commit significant sums to make an impact, given the inroads already made by other car and motorbike-hailing apps.

But the landscape is complex, with motorbike hailing the main battleground in Indonesia, while elsewhere in the region it is a largely two-way battle between Uber and Grab, and primarily in car hailing.

Indonesia’s two-wheel appeal

Indonesia is the region’s key battleground for motorbike-hailing apps. While it has an urban population of 140m, the car-hailing market is somewhat limited. Most urban consumers in the country spend less than Rp20,000 ($1.50) on daily transport, our data show (see chart).

Given that rates for Uber and GrabCar are Rp20,000 and Rp25,000 per 5km, respectively, most consumers cannot regularly use these services and opt for motorbikes instead. In our survey of 1,000 Indonesian consumers, almost 36 per cent of respondents said they used apps for getting a ride by motorbike, compared with 27.7 per cent using car-hailing ones (see chart). This suggests that some 50m people in Indonesia use motorbike-hailing services.

Data from US-based analytics company App Annie, provided to FTCR by Grab and Go-Jek, show Go-Jek’s app had been downloaded by 33m users as of December last year, roughly the same figure as for the whole of Southeast Asia for Grab.

We calculate that across the four other Asean countries that we survey (Malaysia, the Philippines, Thailand and Vietnam) there are only 12m users of motorbike-hailing apps. Malaysia and Thailand banned the use of motorbikes as a form of paid transport last year, effectively removing 20m people from the market.

Go-Jek has benefited from a first-mover advantage, having released its motorbike-hailing app in 2011. Our survey data confirm Go-Jek’s leading position, with 74.9 per cent of Indonesian respondents saying they had used the app, ahead of both GrabBike and UberMoto (see chart). Grab, in which Japan’s SoftBank and Singapore’s Temasek are both investors, only launched bike-hailing services in Indonesia in 2015.

Using our data to create a customer satisfaction index, Go-Jek leads in motorbike-hailing, scoring 31.2 out of 100, with GrabBike on 22.7 and UberMoto on just 14.3. Conversations with users reveal they rate Go-Jek in part because of its wide range of services, such as food and grocery delivery, on-call massage, house cleaning and beauty services. Go-Food, the company’s food delivery service, is the largest such service in Asia outside China. Grab and Uber have more limited offerings. Although they each have a food delivery service, these were only launched last year, whereas Go-Food has been around since early 2015.

Both Grab and Uber have grown fast, however, and in a relatively short period. Grab co-founder and chief executive Anthony Tan told FTCR that the number of combined completed rides using its motorbike and car-hailing services rose 600 per cent in 2016. Uber has made rapid inroads since launching its bike-hailing app last year: 45 per cent of respondents to our survey said they had used the service, behind Grab (which launched in 2015) on 60 per cent.

Go-Jek’s e-payment ambitions in Indonesia

Even if Uber and Grab manage to threaten Go-Jek’s bike-hailing superiority in Indonesia, the company is well placed to achieve its strategic goal of becoming a broad-based digital platform, facilitating the purchase of a variety of goods and services online via its unified payment platform, Go-Pay.

Go-Pay is better developed than its closest competitor, Grab’s GrabPay, which is still in its infancy. Go-Pay already processes more than 50 per cent of Go-Jek transactions. In December, Go-Pay and other payment channels under Go-Jek completed close to 35m transactions at an annual run rate of roughly $1bn.

We believe Go-Jek has the most potential of the three app operators to bring the unbanked and underbanked population in Indonesia into the digital economy. But it faces competition from 21 other players in the e-payment market, mostly first-tier banks and telecoms giants, such as Telkomsel and Indosat.

Furthermore, Go-Jek has said it has no plans to expand beyond Indonesia. We believe the window of opportunity to grow regionally is closing rapidly as Grab and Uber continue to seize market share. This risks limiting Go-Jek’s ability to attract funding. Last year Grab won $750m of new funding, versus Go-Jek’s $555m.

Prospects brighter in regional car hailing

The prospects look better for Uber in the regional car-hailing segment, although it faces stiff competition from Grab and income limitations will drag on market growth.

In all five countries we surveyed, Uber and GrabCar were the two most popular apps. GrabCar had the edge in Indonesia and the Philippines, with Uber leading in Malaysia and Thailand (see chart).

Based on our survey data, an estimated 55m consumers in Asean use GrabCar and 52m use Uber. Grab’s slight lead may result from its deeper regional penetration. Grab is present in 40 cities across the five countries we surveyed, in addition to its home in Singapore, versus 20 for Uber and just 15 for Go-Jek (all in Indonesia).

Grab has also spent heavily on subsidies and advertising, particularly in Indonesia, where it has vowed to invest at least $700m over the next three years. It offers digital vouchers that discount user fares by 50-100 per cent. Grab has so far received $1.45bn in equity financing and expects to raise another $1bn-1.5bn this year, which should help it sustain its aggressive discounting for some time yet.

Go-Jek is taking a similar approach, offering discounts of up to 50 per cent if customers use Go-Pay. This is the same strategy previously adopted by both companies in the motorbike segment. Uber offers only limited discounts, typically to first-time users or as a reward for loyal customers.

In addition to its aggressive discounting, Grab’s rate is not subject to the “surge pricing” that elevates Uber’s fares during periods of high demand or congestion, which makes Grab more popular among the most price-sensitive demographics. In our survey, Grab beat Uber among 18-24-year-olds — typically students or young professionals — and 36-50-year-olds, often price-conscious parents (see chart).

We expect Grab to extend its lead over Uber in Asean if the latter does not subsidise users more heavily to defend its market share and fails to further diversify its services. Uber declined to comment on whether it will respond to Grab’s aggressive subsidy strategy. It may be banking on better service to help it overcome any price differential. Indeed, in our survey, it scored better for consumer satisfaction than GrabCar in Indonesia, Malaysia and the Philippines, although it performed poorly in Thailand (see chart).

Price limits to have little impact

In Indonesia, the government will in June set minimum and maximum price levels for taxi and car-hailing services, partly in response to protests from traditional taxi drivers who feel their business is under threat.

We do not, however, believe this will have much effect on the industry because the fares charged by regular taxis are about the same as those offered by ride-hailing apps. BlueBird, the largest taxi service in the country, charges Rp25,000 per 5km, the same as the standard rate for GrabCar. It is also unclear whether the new rule will affect the discounts the car-hailing companies offer as part of their marketing efforts.

Irrespective of government action, the tension between traditional taxis and ride-hailing operators may be easing, with signs that they may collaborate. Under a recent partnership between Go-Car, GrabCar and traditional taxis, customers can choose to ride in privately owned cars or regular taxis, while still benefiting from discount vouchers.

— Andi Haswidi, Indonesia Researcher