ComfortDelGro in talks with Uber on possible tie-up

ComfortDelGro's taxi fleet has shrunk by 5 per cent since Uber and Grab began operating in Singapore in 2013. Its hired-out rate is estimated to have gone from 98 per cent to as low as 93 per cent.
ComfortDelGro's taxi fleet has shrunk by 5 per cent since Uber and Grab began operating in Singapore in 2013. Its hired-out rate is estimated to have gone from 98 per cent to as low as 93 per cent.PHOTO: BLOOMBERG

Comfort's cabs may be offered on Uber's app; move seen as bid by both to sustain business

Singapore's biggest taxi operator ComfortDelGro is in talks with Uber over a possible alliance that could see its 15,500 cabs made available on the ride-hailing firm's app.

It could also lead to cooperation in fleet management. Uber is estimated to have more than 15,000 cars here, with a utilisation rate of up to 90 per cent.

All other local taxi companies have similar tie-ups with Grab, Uber's main rival here.

In its statement to the Singapore Exchange yesterday, listed ComfortDelGro said it has signed an "exclusivity letter" with Uber for discussions to form a "potential strategic alliance".

But it added that "there is no certainty or assurance that such discussions... will result in any definitive agreement or transaction", and advised investors to act with caution.

When contacted, Uber said it had nothing to add to the news. Grab was also not immediately available for comment.

SHORT- AND LONG-TERM IMPLICATIONS

In the short term, it is positive for ComfortDelGro. Its taxi drivers will see more bookings, and that in turn will mean a better hired-out rate. Its fleet has come down big time... But in the long term, it gives more power to Uber, as more and more people will use Uber's app rather than Comfort's booking platforms.

MR ABHISHEK NIGAM, research analyst at stockbroking firm Nomura.

Mr Neo Nam Heng, chairman of diversified motor group Prime, which has about 700 cabs, said: "Everybody is looking for ways to sustain their business. The other cab companies have tied up with Grab, so Comfort has to do the same."

ComfortDelGro had previously tried to tie up with British start-up Karhoo, which claimed to be a rival to Uber. But that came to nought when Karhoo closed its Singapore office last year amid uncertainty over its financial viability.

Industry watchers said an alliance made economic sense, but could favour Uber more than it would ComfortDelGro.

Research analyst Abhishek Nigam of stockbroking firm Nomura said: "In the short term, it is positive for ComfortDelGro. Its taxi drivers will see more bookings, and that in turn will mean a better hired-out rate. Its fleet has come down big time."

ComfortDelGro's fleet has shrunk by 5 per cent since Uber and Grab began operating in Singapore in 2013. Its hired-out rate is estimated to have also gone from 98 per cent to as low as 93 per cent.

"But in the long term, it gives more power to Uber, as more and more people will use Uber's app rather than Comfort's booking platforms," Mr Nigam noted, adding that this will erode the taxi group's profit margins, and "it might become merely a supplier of cars".

Singapore University of Social Sciences (SUSS) economist and senior lecturer Walter Theseira said ComfortDelGro "has to ensure they participate in developing and owning the core technologies, which are based on predicting, analysing and matching transport demand and supply".

"If they don't, they are basically giving up on the future of transport," he added. "So, it is hard to understand right now if ComfortDelGro will own and develop anything, or if they will just become a supplier of vehicles and drivers."

Transport researcher Park Byung Joon of SUSS said: "Uber got beaten in China by Didi (Chuxing). Didi's strategy was to align itself with local taxi companies - not just building its own fleet. This way, Didi was able to build its network quicker and cheaper.

"It looks like Uber is trying to replicate that very strategy here."

Dr Park added that the move might be a decision from both sides to stem bleeding: "Comfort is the taxi company in Singapore. It has to defend its turf. On the other hand, Uber is losing money... so, instead of going head to head, it looks like they are engaged in a truce."

At the end of trading yesterday, ComfortDelGro's stock fell two cents to close at $2.17, its lowest since mid-2014.

A version of this article appeared in the print edition of The Straits Times on August 23, 2017, with the headline 'ComfortDelGro in talks with Uber on possible tie-up'. Print Edition | Subscribe