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.