Lack of app interoperability could cut its impact.
Although Indonesian ride-hailing platform Go-Jek is widely expected to pose a formidable threat to Grab’s dominance in Singapore’s ride-hailing scene, a number of app design issues may dent the new player’s dreams of wrestling market share away from the incumbent as it tries to crack the Singapore market.
Go-Jek’s go-to expansion model of launching a separate ride-hailing app for its overseas operations that takes into account different market specificities may have worked well in the past but may easily turn awry in its upcoming debut in November, CIMB Research said in a note.
“We think it will launch a separate app for its Singapore operations as well, thus making it more challenging for Go-Jek to roll out new features and security fixes across its different apps. This may limit Go-Jek in posing serious private hire car (PHC) competition if the user experience is proven to be lacking,” added CIMB.
There is currently little to no interoperability for app users using Go-Jek services in Indonesia and Vietnam, the latter where it has a separate app called Go-Viet. Its ride-hailing services are also offered under the brand “Get” in Thailand.
Such model may make it more challenging for the new market entrant to deploy new features and updates as it has to grapple with different applications across its overseas footholds.
This business model stands in contrast to Grab where a single app is used to enhance convenience of its wide array of services that go beyond ride-hailing across its operating markets like Cambodia, Indonesia, Myanmar, Philippines, Thailand and Vietnam.
Go-Jek would also have to first capture Grab’s PHC driver base as it still lacks a domestic app user base that could form demand for taxi drivers to switch over to its platform. This is because going after taxi drivers will be challenge for the new market player as taxi drivers earn more than PHC drivers after the withdrawal of cash incentives following the merger, noted CIMB.
“We believe Go-Jek would first target Grab’s PHC drivers (c.22,000 valid PDVL drivers at 1 Jul 18) to form the supply side for its potential users by offering better cash incentives/rebates.”
Against this aggressive expansion strategy by Go-Jek, CIMB expects ComfortDelGro is expected to bear the brunt of a possible earnings impact of around 4-6% decline from FY19-20 EPS in a worst case scenario. This will be brought about by the remote possibility of a taxi driver exodus in the case that PHC players move more aggressively to lure them away.
“The risk is that a revival in PHC competition could still hurt CD’s earnings in the longer term,” the firm added.
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