Uber Grab "contributes rice to cook together", Vietnamese people no longer hope for cheap fares?

Uber and Grab came to Vietnam, bringing with them the habit of using cheap "technology cars" for both drivers and users. There was a time when they competed fiercely with each other to gain market share and attract drivers, but surprisingly on the morning of March 26, these two companies announced a merger. Specifically, Grab acquired all of Uber's business operations in Southeast Asia, in return Uber will keep 27.5% of Grab's shares.

The sudden merger of two fierce competitors is believed by observers to be due to pressure from SoftBank. The Japanese tech giant is a major shareholder of both Uber and Grab, and it is understandable that SoftBank does not want the two companies to continue burning capital to compete for market share.

Since entering the Vietnamese market, Uber and Grab have continuously reported losses. Grab has been operating in Vietnam since February 2014, with a legal capital of 20 billion VND, but by the end of 2017, it had accumulated losses of 938.2 billion VND.

A representative of Uber Vietnam also confirmed that the company is currently unprofitable, even though its total revenue from 2014 to mid-2017 was about VND2,706 billion.

Uber and Grab have come together in Southeast Asia. Illustration photo.

Minister of Transport Nguyen Van The once affirmed that it was necessary to clarify why the two ride-hailing companies had "huge" revenue but often reported losses. Minister The did not rule out the possibility that both were burning capital to destroy competitors.

Despite causing headaches for regulators, Uber and Grab still bring positive values ​​to users. Vietnamese customers get to experience a new, civilized taxi service with cheaper fares than traditional taxis, not to mention the continuous promotions and fare reductions launched by the two companies.

"Every month I receive discount codes from Uber and Grab. The constant interwoven discounts, even at the same time, from both companies have made me get into the habit of using a car, because the price is only a little higher than a motorbike taxi and I don't have to worry about the sun or rain," said Ms. P. Chi (Hai Ba Trung, Hanoi).

However, when Grab acquired Uber and Uber became a shareholder of Grab, there was no longer any reason for Grab to promote heavily, because there were no more direct competitors.

According to statistics ofBloomberg, Uber has burned through an estimated $10.7 billion worldwide to compete since its founding. Cutting prices to gain market share is a long-term race, and in Southeast Asia, Grab seems to be winning.

It is easy to see that when there is a winner and a loser, the race will stop, and this is a favorable time for Grab to increase fares and cut promotions to recover the capital "burned" in the race with Uber.

Grab currently has about 86 million app downloads, providing services in 190 cities across 8 Southeast Asian countries, namely Singapore, Indonesia, Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia.

With the influx of new customers from Uber, there is no doubt that Grab will be the biggest force in the Southeast Asian ride-hailing market. The new price level of ride-hailing services via the application in this market will be set by Grab, most likely the cheap fares and great promotions for users will no longer exist.

Economist Luong Hoai Nam said it was difficult to predict Grab’s immediate strategy after acquiring Uber. However, the expert shared that less competition is always disadvantageous for consumers.

Talk toZing.vnDuring a protest against Grab's increase in commission rates for partner drivers in January, a Grab partner driver said, "If the company does not adjust the commission rates appropriately, we will switch to driving for Uber."

If we apply that sharing to the present, we can see that Grab driver partners are the ones holding the knife by the blade. On the other hand, in the past, Grab has repeatedly raised the fee for driver partners after the "honeymoon" period when it first entered the Vietnamese market.

Specifically, when it first entered the market, to attract drivers, Grab applied a discount rate of only 15%. However, when it had a stable number of "drivers", Grab unilaterally increased the discount to 20%, then 23.6%, 28.6% in the face of the drivers' helplessness.

"I joined GrabBike when the discount was 15%, and now the discount has been increased twice but I have not been able to give my opinion. There is no such 'partner' in business," said Mr. T. Dung, a Grab partner driver in Hanoi.

Under pressure from its partners, Grab had to adjust its discount rate for GrabBike, a move that was said to be aimed at retaining drivers. However, after acquiring Uber, it can be seen that Grab's position relative to its partner drivers is higher than before, and it would not be surprising if Grab unilaterally brought the discount rate back to its previous high level.

Most Uber and Grab drivers take out loans to buy cars, and with the financial burden, every day on strike is a day of losing money.

When competition decreases, not only are users disadvantaged, but also partner drivers, as the choices become narrower and narrower.