Once upon a time in Singapore, taxi drivers held commuters to ransom with their ridiculous surcharges, bad practices of taking longer routes to earn higher fares and going ‘MIA’ during peak hours. Suffice to say, in every industry, there will always be black sheep. But the emergence of Grab and Uber have changed the game and levelled the playing field. Among the biggest casualty from this fall-out had to be ComfortDelgro, the largest taxi operator in Singapore.
The irony about ComfortDelgro is that as a taxi operator, it derives the bulk of its revenue from bus and MRT businesses, instead of its taxi business. With the disruption in the taxi landscape, perhaps in no time, ComfortDelgro may consider switching its taxi drivers to bus or train drivers. This scenario may become a reality due to a frightening competitive advantage of Uber and Grab – they are both relatively asset-lite companies. Read on to find out why this spell big trouble for this Singapore blue chip.
Horror ride for Comfort
The evolving on-demand transport landscape is indeed sweet revenge for commuters as taxi operators had monopolised the market for the longest time due to lack of credible taxi alternatives. A lot of credit must be given to the Minister for Transport, Khaw Boon Wan for democratizing the private-hiring industry. Under his helm, the Land Transport Authority kept its promise of adopting “light touch” approach in regulating private-hire car services.
The biggest misconception of Grab and Uber is their business model. At the core, Grab and Uber are not taxi operators, but technology companies. Their product offering is basically the provision of digital booking system. Due to this, both Grab and Uber are not burdened by asset depreciation, legacy issues and regulatory baggage. The same cannot be said for ComfortDelgro.
According to the FY2016 financial report, ComfortDelgro had a combined fleet of 16,822 Comfort and CityCab taxis. [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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