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Grab ‘moving to up fleet size, thwart Uber’

SINGAPORE — Grab’s latest move to entice ComfortDelGro cabbies to join its taxi partners is akin to killing two birds with one stone, and could nudge the taxi operator and Uber towards a partnership, analysts said.

Uber and Grab offices at Midview City at Sin Ming. Photo: Nuria Ling/TODAY

Uber and Grab offices at Midview City at Sin Ming. Photo: Nuria Ling/TODAY

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SINGAPORE — Grab’s latest move to entice ComfortDelGro cabbies to join its taxi partners is akin to killing two birds with one stone, and could nudge the taxi operator and Uber towards a partnership, analysts said.

ComfortDelGro and Uber were already in talks over a potential tie-up when Grab, over the weekend, promised ComfortDelGro taxi drivers heavily discounted rental rates should they cross over to any of its five partner taxi operators, namely Trans-Cab, Prime Taxi, SMRT Taxis, Premier and HDT Singapore Taxi.

Assistant Professor Terence Fan of the Singapore Management University said while Grab is willing to fork out huge sums for now, the move has the potential to reduce ComfortDelGro’s fleet size and increase its own. “They’re ... killing two birds with one stone,” he said.

Grab’s offer cuts by about half what some ComfortDelGro drivers are paying in rent.

However, Singapore University of Social Sciences’ transport economist Walter Theseira said such incentives to woo drivers cannot work in the long run.

“Perhaps it could be justified in terms of acquisition costs, but only if the acquired driver displays some loyalty to the platform,” he said.

If Grab’s offer hits the taxi operator’s hire-out rates and operations significantly, it could push ComfortDelGro closer to sealing its deal with Uber, Dr Theseira added. Any counter-offer from ComfortDelGro would have to be applied across the board for all its taxi drivers, which would be costly and a “stretch for Comfort” to bear, he said.

Instead, Uber may offer financial incentives, to lure drivers still sitting on the fence to stay with the taxi operator.

Unlike private-hire car firms such as Grab and Uber, which get venture-capital financing, taxi operators do not have such funding, he said.

ComfortDelGro, a listed company, must also be accountable to its shareholders. He added: “Competition for supply of drivers and vehicles has heated up considerably, as the market is now effectively divided in two — the Uber/Comfort group and the Grab/other taxi companies group.”

Assistant Professor Fan said Grab’s move could be to pre-empt Uber from getting “too aggressive” and “too big, too fast”, since ComfortDelGro has the largest taxi fleet here, numbering nearly 16,000 under its Comfort and CityCab brands.

However, Dr Theseira reckoned that cabbies may consider not just rental costs, but the size of an operator’s network and its reputation, for instance, before making the switch.

While Grab’s move may seem bold and competitive, he does not expect a vast majority of ComfortDelGro’s drivers to bite. Grab’s taxi partners are also unlikely to be able to handle an influx of drivers, he pointed out.

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