Why do UBER, GRAB need to buy cars in Singapore?
Vivek Singh Jamwal, FRM
Director, Private Markets Technology at Manulife John Hancock Investment Management
Statistics - Comfort - Total Taxi fleet - 17,000
No of cars UBER is planning to BUY - 1800 (in addition to the current Uber fleet)
No of cars GRAB is planning to BUY -similar to the 1800 UBER number.
Existing UBER and GRAB cars on road - 10,000.
Uber, Grab are going after Comfort, SMRT taxi services in Singapore. Thats a well known fact. However now Uber and GRAB are buying cars - but why do they need to buy cars when they already have about 10,000 cars on the road?
1) Rentals that Comfort charges are very high. Comfort charges $130 per day, which is very high vs cost of buying a car and running it via a rideshare program. $130 * 30 = SGD 3900 per month, SGD 46,800 per year, which is very high.
Hence UBER and GRAB want to buy vehicles and attract driver to drive an Uber, Grab car vs driving a taxi. Uber cars can be rented for about 50-70 dollars a day (and maybe there are other charges that you take on yourself like insurance [SGD 1K-2k], and car repairs depending on condition). Hence you can see that the Uber makes much more sense.
2) Uber, Grab are trying to poach Comfort's drivers? Leasing the cars themselves - they are luring taxi drivers by offering them lower rentals and offering them an opportunity to make more money for the same effort.
There is no reason why this arbitrage should not be bridged. Taxi drivers are not very happy about the increasing rentals - Comfort increased the rentals from 90 dollars a day to 130 dollars a day, but increased fares as well - hence net net taxi drivers are not very well off given the inflation in Singapore. Hence they will be looking for alternatives where they are paid fairly for their efforts.
https://mypaper.sg/top-stories/coe-prices-rise-uber-grabs-14-winning-bids-20160421
What has been the impact of these ride share services in Singapore?
1) Second hand cars are expensive - the prices of second hand cars have gone up in Singapore over the last 1 year as more and more people buy cars to drive for grab and uber.
2) New cars are getting expensive - this month 14% of the cars were won by uber in the COE drive, hence kept the COE from falling.
3) Consumer is the real winner - As more and more cars come on the road - the supply increases and the commuting fare goes down.
4) Attitude of the taxi companies - These taxi companies are charging 10% for credit card transactions. Visa questioned, and comfort dropped visa cards from its network. Right now they will be wondering if they still want to levy this 10% charge - the competitors grab and uber charge 0%. (visa will be accepted on comfort starting 2016:) )
Why would you not want to ride taxis in Singapore:
1) Surcharges - Surcharges are a norm, almost everytime that you want a cab- there will be a surcharge.
2) Disappearing acts - When you want a cab, cabbies mysteriously vanish. Hard to get cabs when you need one.
3) Credit card tax - 10% tax on credit cards.
Personal opinion - I prefer ride sharing on grab/uber to taxis, because everything is so hassle free.
All in all, as the competition heats up, new supply comes in, fares will be under pressure and taxi owners will demand a level playing field. If they dont get one, they will jump ship. Given that the cost structure in large organizations is quite sticky, comfort will find it hard to compete with nimble providers that are backed with some serious capital. At some point on time, if the fares are low enough, it will make sense to ride share if you are a group/family of 4. Tough times ahead for taxi companies.
Director, Private Markets Technology at Manulife John Hancock Investment Management
8 年callum, couple of points here. no one- right now uber driver pays 50-60 dollars a day for rental and 40 dollars to.uber as comission - assuming earnings of 200sgd per day. that translates to total rent of about 90-100 dollars a day. for comfort to cut fares- they need to cut rentals first from 130 sgd to 100 sgd and then start looking at lower fares..then they need to make it easier for consumers to book.by scrapping credit card fees, booking fees, peak period charges etc. finally they need to cut fares. hence as a publicly listed company they might find it hard to cut revenue by 30% and earnings a lot more, due to.operational leverage. next and most important point is - how low can fares go? depends on the motivations of the driver. taxi drivers depend on the taxi for their incomes. uber drivers can be real estate agents supplementing their income, even kids who take up uber to drive the minimum hours and own a car for very little cost. hence.these people can accept a lot.lower fares than career drivers. finally cost structures in comfort will be bloated,vs lean strucutres in uber. due to all these reasons,comfort will find it extremely hard to.wipe out uber and grab.
Taxi companies have a lower cost to deploying cars, and yet their rentals are higher than car rental companies. Technically, if taxi companies lower their rentals, could it wipe out uber and grab?