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Optimum asset utilization crucial for shared mobility companies’ recovery in Southeast Asia, says GlobalData

Optimum asset utilization crucial for shared mobility companies’ recovery in Southeast Asia, says GlobalData

Following the news that the overall revenues of Singapore-based tech giant Grab have been pulled down by its core ride-hailing segment as people continue to stay at home due to coronavirus (COVID-19) outbreak;

Animesh Kumar, Director of Automotive Consulting at GlobalData, a leading research and consulting company, offers his view:

“Southeast Asian countries have taken severe hit due to the spread of COVID-19. Economic activities have been affected due to stringent but necessary measures like lockdown, circuit breakers, movement control orders and large-scale social restriction. COVID-19 pandemic is expected to result in major shift in consumer preferences and behavior across sectors and industries. The pandemic will significantly change the commuting pattern across Southeast Asia, which heavily relies on public transport (bus, rail) and shared mobility (ride-hailing, ridesharing, car-sharing and bike-sharing).

“Shared mobility witnessed significant decline in ridership in March and April due to restrictions on movement of people across Southeast Asian countries. Grab, a shared mobility giant both in SEA as well as globally, witnessed double-digit decline in gross merchandise volume. Ride-hailing giants Grab and Gojek, along with other smaller players, were compelled to suspend ridesharing and bike taxi services to comply with the social distancing practises. The companies also had to take measures to support the drivers, which in turn affected their revenues. For instance, Grab reduced commission rate by 50% for private-hire driver partners, 0% commission for GrabRentals drivers and rental waiver between 6th April and 4th May. Grab and Gojek also launched soft-loan program for driver-partners and merchants with reduced interest rates and waiver from re-payment for the first three months, in an effort to support their livelihood.

“The impact on shared mobility services will vary depending on the number of people involved. Hence, ridesharing or carpooling and shuttle services will be severely affected due to the concerns regarding safety and hygiene. In a typical ridesharing transaction, a customer has to come in close contact with the driver and there is a possibility of close contacts with one or few co-passengers. Hence, such services will not be preferred in the short to medium-term. Services where customers drive or ride the vehicle on their own – for example, car-sharing, bicycle-sharing, bike-sharing or rental - will be preferred. Players will have to take steps to regain consumer confidence. Strict hygiene measures will be required, with new practices put in place to ensure safety of every participant in a typical transaction.

“Shared mobility players will have to focus more on non-core businesses, including food and parcel delivery services and payments. The demand for on-demand food delivery has spiked in some countries, including Singapore and it presents opportunities that must be tapped.

“Moreover, shared mobility players should ensure that they can utilize the assets across services. Grab’s extension of food & parcel delivery service opportunities to ride-hailing driver-partners is the right move in this direction and a ‘win-win’ for both driver-partners and the company. In some countries in the region, there may be some regulatory hurdles around leveraging assets across services. Players should work with administration and authorities to overcome such challenges. Optimizing the use of existing assets will be crucial as it can help in easing top-line as well as bottom-line pressures.”