Competition jeking up in Singapore rail hailing space
- Gojek to lower driver commissions in Singapore from 15% to 10% to attract more drivers amid supply crunch
- A tiered distance based cashless transaction fee also to be introduced and 15% promo code to defray higher fees and attract more riders
- CDG’s commission rates remain competitive, though market expectations of potential commission hike may be pushed back; Maintain BUY with TP of S$1.65
Gojek to lower driver commissions to 10% to attract more drivers. Gojek previously raised driver commission in Singapore to 15% in Feb-23. As a background, this was previously 20% pre-COVID and was cut to 10% in Jun 2021. It is now lowering the commission to 10% from 1 Nov until at least end of 2024. We believe one objective of the commission cut is to attract more drivers to its platform amidst supply crunch in the point-to-point transport sector. The 10% commission is on par with the ComfortDelgro Group (CDG)’s commission for private hire drivers with their own vehicles taking rides on CDG’s ride-hailing platform, Zig. It remains higher than CDG’s Zig platform commission for private hire drivers who leased vehicles from CDG (8%) and CDG taxi drivers (5%). The ride-hailing leader, Grab, charges its drivers a commission of up to 20.18%.
Gojek to introduce tiered distance based cashless transaction fee and offering 15% promo code to offset higher fees and attract more riders. In line with market practice, Gojek will introduce a tiered distance based fee of between 10 cents and 60 cents for passengers using cashless payment. CDG charges transaction fee only for metered fare at 10% of fare for credit card payment and 30 cent charge for other cashless payments like Nets from 1 Nov. For the month of Nov, to offset the higher fee and attract more riders, it will offer a promo code for 15% discount off Gojek rides, capped at $5.
Attempt by Gojek to attract more drivers to its platform. The announced commission cuts and incentives are likely an attempt to attract drivers into its platform. We believe this new move could likely intensify losses and the business case to continue operation in Singapore remains weak.
Driver commissions for CDG taxi and private hire drivers remain competitive. At between 5% to 10% Zig commission, CDG’s drivers commission continue to remain competitive. Nonetheless, we believe this lower commission from Gojek could potentially push back plans to increase commission rates in order to remain competitive. While the ride-hailing environment will be more competitive in the short term, we are positive in the medium/long-term with a view of Gojek exiting the market. We have assumed that commission rates will remain at current level in our earnings estimates. Maintain BUY with TP of S$1.65, based on blended valuation of its average 5-year historical PB and EV/EBITDA at 1.3x and 5x, respectively.