Will ComfortDelGro survive the onslaught of Grab and Uber?

Don’t be fooled by calm before the storm. Competition between ComfortDelGro, Grab and Uber have reached a boiling point. A price war has broken out and tougher challenges are ahead.

 

How bad is bad?

  • Grab and Uber has greatly increased the number of for-hire vehicles, competing directly with taxi. See ST report 16-Jan-2017.
  • Supply has surged, but demand is fairly stable. A visit to all the taxi hq shows plenty of unhired taxis idling around. See ST report 15-Jan-2017.
  • Transcab, the no. 2 player, has cut its rental rates aggressively. A price war has begun. See ST report 29-Dec-2016.
  • Comfort’s 1% idle rate can’t last any longer. It will only go up.
  • Grab and Uber are promoting carpooling aggressively. When commuters share rides, less for-vehicles are required to service the same population.
  • Less vehicles = Less leasing income for ComfortDelGro.
  • Grab and Uber are less affected because they earn more from matching passengers with vehicles, than from leasing of vehicles.
  • Finally, Grab has invested into a autonomous driving venture in Singapore. If it succeeds, taxi will be completed obliterated.
  • The good old days of taxi leasing are over. ComfortDelGro does not have any effective plans to fight against Grab and Uber.

 

Why are its earning still stable?

  • Earnings are backwards looking and do not reflect the future.
  • When more taxi idle and rental rates go down, earnings will fall.
  • Taxi account for 1/3 of ComfortDelGro’s earnings. Any improvement in bus and trains cannot completely offset the weakness from taxi.
  • Overseas taxi operations are equally vulnerable to the likes of Grab and Uber.