Will ComfortDelGro win the point-to-point 2.0 race against Grab?

Business Times

29-04-2025

[SINGAPORE] Grab's entry into Singapore's taxi market is likely to give the leading incumbent ComfortDelGro a run for its money.
Studies have shown that people who choose to drive taxis are those who want to devote more time to driving for a living. Private-hire car drivers, on the other hand, are a mix of full-time drivers and part-timers who also use their cars for personal purposes.
Moreover, taxi drivers are permitted to provide ride-hailing trips, while private-hire car drivers are not allowed to take street-hail passengers.
Some market watchers – from a transport economist to a taxi competitor – see Grab's street-hail operator licence as a way to secure a reliable supply of drivers.
The way Professor Walter Theseira sees it, Grab is 'not interested in street-hail (rides) under the current business model'. After all, he points out, 'platforms and taxi operators do not earn any commission'.
What's in it for the platform operator then?
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An executive for one of the incumbent taxi companies said new taxi companies such as GrabCab – a subsidiary of the Nasdaq-listed Grab that was awarded the taxi operator licence – are likely to draw drivers from the existing operators.
For some, it is clear that Grab wants to grab taxi drivers, who are seen as more productive than private-hire vehicle drivers.
It is not the first time Grab has tried to enter the taxi market.
Grab in 2024 abandoned plans to acquire taxi company Trans-cab after failing to obtain the all-clear from the competition watchdog.
The proposed Trans-cab purchase was Grab's third attempt at buying a taxi company in Singapore.
In 2017, there were talks to buy SMRT's taxi fleet, but the deal fell through. In 2022, its discussion with Prime Taxi, the smallest cab operator in the Republic, did not materialise into a transaction either.
ComfortDelGro's fleet of 8,255 taxis under Comfort and CityCab brands means the Singapore mainboard-listed transport behemoth has about 64% share of the market. PHOTO: BT FILE
Grab gears up for recruitment
Shortly after being shown the green light to provide taxi services, Grab sprang into action to recruit taxi drivers. It dangled 'early-bird' rental offers and asked applicants – in what it touts as an exclusive deal – to make a deposit of S$50 for priority access to renting from GrabCab.
Those without a taxi driver's provisional licence (TDVL) will get Grab's sponsorship for the course to earn it – with terms and conditions attached.
The fund to buy Trans-cab – said to be around S$100 million – will now likely serve as the financial firepower to incentivise drivers to jump ship from other taxi operators or entice those with a TDVL but are inactive to rejoin the industry.
As at February, there were 90,556 holders of a TDVL compared to a taxi population of 12,941, statistics from the Land Transport Authority showed.
Assuming there is a relief driver for half of the taxi population, that would bring the pool of active taxi drivers in Singapore to about 20,000.
This means that there could be some 70,000 people that hold TDVLs but do not drive taxis. Or, as a TDVL allows a holder to drive a taxi or a private-hire car, some of these could be private-hire car drivers.
ComfortDelGro's fleet of 8,255 taxis under the Comfort and CityCab brands means the Singapore mainboard-listed transport behemoth has about 64 per cent share of the market.
Assuming Grab wants to build an initial fleet of 800 taxis – the minimum required by the authority – and that the source of drivers would be from the incumbents proportionate to their market share, this could see ComfortDelGro lose about 512 drivers.
But if Grab builds a fleet size of 2,000 – Trans-cab's taxi population at the time the earlier acquisition was proposed – then the number of taxi drivers exiting ComfortDelGro could rise to 1,280.
Of course, not all the drivers that Grab wants to recruit would be from the incumbents. However, the majority are likely to be. Their dwindling numbers in recent years as well as the flexibility and lower cost of being private-hire car drivers substantiate this proposition – unless there is a spike in Singapore's unemployment rate.
A back-of-the-envelope calculation, using an attrition of 512 to 1,280 drivers and a conservative daily rent of S$100, ComfortDelGro's rental loss alone – not including ancillary revenue such as those from fuel sales and platform fees – would probably amount to S$18.4 million to S$46 million. This is hardly damaging.
The transport powerhouse reported S$748.7 million in revenue and S$135.3 million in operating profit from the taxi and private-hire vehicle segment for FY2024, without breaking down by geography and sub-segment.
The taxi business is ComfortDelGro's most lucrative transport segment, giving it an operating profit margin of 18.1 per cent for FY2024. Its two other transport segments – public transport and other private transport – each only had a meagre operating profit margin of 4.2 per cent.
One would expect ComfortDelGro not to cede ground to Grab easily. In terms of rental rates, benefits and incentives, it is likely to match, if not outdo, its competitor to protect this source of revenue
This will be the second round of the face-off, after Grab drew taxi drivers to its platform with generous incentives in the early days of ride-hailing.
In the short term, this could mean rising costs for both operators. But there is more at stake for ComfortDelGro to defend its turf than for Grab to make inroads into the taxi market.
If ComfortDelGro is not able to keep its taxi population at a certain level, its network effect in terms of drivers and passengers will decrease and it will also lose economies of scale. By then, the impact to ComfortDelGro could be far greater than the initial hit of S$46 million.
While ComfortDelGro might be competitive in dishing out carrots, it also has to significantly rev up its technology prowess – which is seen as Grab's strength.
One would imagine that the competitor could leverage technology to tackle the imbalance in demand and supply by identifying areas or time of the day where passenger demand is high and unmet by private-hire car drivers, and deploying taxi drivers to meet such demand.
This will boost cabbies' earnings and passenger satisfaction, in turn creating a virtuous cycle.