Experts fear foreign rivals too strong for Vietnam ride-hailing firms
Vietnamese ride-hailing services are struggling to compete with foreign firms Grab and Go-Viet due to a lack of resources.
FastGo last month claimed to have 15,000 taxi and motorbike partner drivers in Hanoi and Ho Chi Minh City, but they are not a common sight on the streets unlike the ubiquitous red and green uniforms of Go-Viet and Grab drivers.
VATO, which received funding of $100 million from local transportation firm Phuong Trang, is also having trouble expanding after launching in May, its CEO Tran Thanh Nam admitted to the media.
Another competitor, Aber, run by a group of young Vietnamese based in Europe, had said August 10 it would “temporarily cease app operations for an upgrade.” It has not made a return so far.
Bui Danh Lien, former chairman of the Hanoi Transport Association, said operators need to give drivers a steady income to keep them and at the same time offer customers plenty of discounts and cheap fares, and “this is a tough challenge.”
Economist Do Hoa told local media that the ride-hailing market is “a race to spend money”, and those without deep pockets won’t be able to compete.
Grab and Go-Viet are willing to charge their customers as low as VND1,000 (4.3 cents) for a ride, he pointed out.
“Vietnamese ride services are not financially capable of sustaining such losses like the foreign companies.”
Even major players like Grab and Uber report big losses in Vietnam. According to the General Department of Taxation, Grab, with a total registered capital of only VND20 billion ($881,000), has incurred losses of nearly VND1 trillion ($43.48 million) during its three years in Vietnam.
But this cash burn strategy is how Grab and Uber are eating up traditional taxi firms’ market share. In 2014-15 they launched promotion after promotion, including free rides and discounts, to attract customers. They expanded their driver networks by offering subsidies and big rewards based on performance.
Though the lack of funding is a weakness of local ride-hailing firms, there are other ways for them to grow, Dr Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research.
“Since the lack of resources is a disadvantage for Vietnamese ride-hailing apps, they should not enter the cash burn race.”
Going head-to-head with bigger rivals is not the right strategy to follow, he said.
“They can enter niche markets like delivery, car rentals and long-distance ride services. Instead of trying to divide market share in the beginning, newcomers should think of a long-term strategy to build a solid foundation.”
Nguyen Manh Hung, former chairman of the Vietnam Automobile Transport Association, was quoted by Tuoi Tre newspaper as saying local firms are unable to compete with Grab and Go-Viet because they are divided.
If they join hands they could compete, he said.
Go-Viet, the Vietnamese operation of Indonesia’s Go-Jek, came early last month seeking a share of the market that Grab has been dominating after the departure of Uber.
Go-Jek founder and chief executive Nadiem Makarim said Go-Viet has grabbed a 35 percent share of the motorbike ride-hailing market in HCMC within six weeks of its launch on August 1.