Grab’s deal to buy Uber sparks fear of price hike in Vietnam

By Ngan Anh   March 28, 2018 | 11:31 pm PT
Grab’s deal to buy Uber sparks fear of price hike in Vietnam
Grab cars are now a major transport service in Vietnam. Photo by VnExpress
With the competition gone, the road is clear for Grab to start manipulating prices.

Customers and drivers are both worried that ride-hailing firm Grab's acquisition of rival Uber’s Southeast Asian business will reduce competition, resulting in higher fares and fewer incentives.

The services in Vietnam have long relied on discounts for customers and incentives for drivers.

Reuters quoted Grab as saying that the Uber acquisition accelerated its path to profitability in its core transport business, as it would become the most cost-efficient Southeast Asian platform.

However, it is bad news for both customers and drivers in Vietnam, where there are a few public transport options, and the apps have grown in popularity.

Trinh Bao Tram uses either Grab or Uber for her daily commute in Hanoi, and the discount codes available on any given day ultimately decide which service she uses, but now the 38-year-old newspaper editor is concerned about a price hike.

“I use whichever firm gives me discount codes, if not, I’ll skip it. After the merger, I'll have no choice except Grab,” she said. “As the only app left, the firm could easily raise prices.”

Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research, said Grab is likely to start manipulating the price in a market with no direct rivals. "By monopolizing the market, Grab will become powerful.”

The cheap services that Vietnamese commuters have been enjoying are likely to become expensive, especially given the poor standard of taxi services, said industry insiders.

Many drivers having reportedly given up their taxis over the past few years because they were unable to compete with the lower fares offered by Uber and Grab.

In July last year, Vietnam’s top taxi firm Vinasun said nearly 8,000 of its drivers had quit in the first half of 2017 due to harsh competition from ride-hailing firms.

Three months later, it reported losing 2,000 more drivers for the same reason, leaving the company with 7,000 employees.

The same story applies to Mai Linh, another major local taxi firm. Mai Linh lost 6,000 drivers in the first half of 2017, equivalent to 20 percent of its employees, according to a company report.

Nguyen Van Thang, 28, who drives for both Grab and Uber, said: “The takeover is bad news. Without competition, they could ask for higher commission and reduce their support.”

Thang said many drivers actually switch between driving for Uber or Grab, depending on the incentives they are offering. “Now we don’t have a choice. We will have to take whatever incentives Grab offers.”

The deal has drawn comparisons to a merger between Grab investor Didi Chuxing and China’s Uber business in 2016. After the takeover, driver numbers dropped dramatically as subsidies lapsed and new regulations raised residence requirements for drivers.

In the following year, driver response rates fell between 15 and 40 percent in major Chinese cities, Reuters quoted data from Didi Chuxing as saying.

The merger has raised concerns that Grab will monopolize the market, violating the competition law.

To examine the issue, Vietnam's Competition Authority under the Ministry of Industry and Trade has asked Grab to provide documents relating to its acquisition of Uber’s business in Southeast Asia, including Vietnam.

“After receiving the complete documents, we will analyze and assess whether the merger violates the competition law or not,” said vice head of the authority, Trinh Anh Tuan.

Ride-hailing firm Uber Technologies Inc has agreed to sell its Southeast Asian business to bigger regional rival Grab, the firms said on Monday, marking the U.S. company’s second retreat from an Asian market.

Uber will take a 27.5 percent stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. Grab was last valued at an estimated $6 billion.

Grab provides transportation, food delivery, mobile payments and financial services and operates in 195 cities across Southeast Asia. The company claimed to have 95 percent market share in taxi ride-hailing when it announced plans to raise more than $2.5 billion from SoftBank and other investors in 2017.

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