At a time when the concept of ride-hailing is picking up across Southeast Asia, the car-sharing industry is gradually making its way in Malaysia. The industry has a high aim – to replace or to reduce car ownership.
For car-sharing platform operators, Malaysia is a unique market as car ownership rate is at a whopping 93 per cent – the third highest in the world. And, experts say, that is exactly what makes car-sharing viable in the market.
“It’s the best thing – the fact that car ownership is so high, it means there’s a lot of opportunities for us to play with and to move towards that urban mobility mindset. If car ownership is not high, it means no one really drives because your public transportation and other alternative transportation are so efficient that you don’t need a car,” said GoCar CEO Alan Cheah.
Given the geographical landscape of Southeast Asia and the size of public transport infrastructure in the region, medium-range mobility – between 20km and 80km travelling range – is what the region needs, added Kwikcar co-founder and CEO Jared Chan.
“It means that a lot of cars are needed to get around cities. And in Malaysia, there are about 13 million privately-owned vehicles. But still, only one out of three persons here owns a car. So, we want to offer a chance to those who don’t to have access to a car as and when they need it,” said Chan.
“We believe that there are enough under-utilised cars in the region and there is enough demand – look at car sales, it has continued to grow. We also believe that we don’t have to own a car, especially if we don’t drive it so often.”
These companies are hoping for Malaysia to emulate markets such as Denmark and Finland. These countries used to have a high car ownership rate but are now moving towards shared urban mobility.
“When we own the fleet, we know exactly how to deploy and maximise resources. It is unlike when you own a car, and you leave the car at home or at the office for eight to nine hours unused,” said GoCar’s Cheah.
The ‘traditional’ B2C model
Unlike another local car-sharing startup KwikCar, GoCar doesn’t operate a peer-to-peer (P2P) car-sharing model. Cheah shared that the startup is already running a sizeable fleet of about 700 cars.
“Managing our own fleet and users in the [car-sharing] community is already a big challenge. So, if we go into the P2P model now, we have to also manage individuals who are providing their cars on our platform,” he said.
It is understandable for GoCar to leave the P2P model. As part of Malaysian automotive conglomerate Tan Chong Group, the startup leverages its strategic relationship to boost its fleet size.
A typical GoCar user rents a car for at least two days on average, according to the startup’s data, although hourly, daily and monthly rentals are also available.
“It makes more sense because of the traffic in Malaysia. So, in that sense, we don’t need to move to P2P. Looking at our utilisation rate, our supply is able to cater to the demand. And if the demand increases, then I just need to ring the bell next door [Tan Chong Group’s office],” said Cheah.
The startup is majority-owned by local car-rental company Mayflower, which is part of the Tan Chong Group that is run by the family of Grab co-founder Anthony Tan. In 2016, through Warisan TC Holdings, Mayflower acquired a 55 per cent stake in GoCar for about $109,000, a year after the startup was launched by its founder TJ Tan. Cheah was then brought in to run GoCar’s operations.
“We see GoCar as an evolution of our traditional car rental model. The competitive moat around traditional car rental is evaporating. The ‘counter’ is being supplanted by lines of code, new cultures, and mega fleet managers, requiring new skills (and pricing) that shake the rental market over time,” Tan Chong Financial Services head Nicholas Tan had earlier said.
Working with an automotive conglomerate
Three years on after the acquisition by Mayflower, Cheah said that being part of a bigger group gives GoCar an upper hand in operating its business.
“In terms of operations, scalability, industry knowledge – all these are well covered. As a startup and as much as we are good at tech, there are things that were lacking such as car servicing, permits, and expansion. We now can leverage Tan Chong Group’s service centres, hotline, tow trucks – that’s why being part of the group has changed the operations a lot,” he said.
Car rental is basically a byproduct of car-sharing, and the latter is not looking to replace the former, although both segments are somewhat inseparable.
“Some users who do car rental will not consider car-sharing at all. So, we do what we do, and they [car rental companies] do what they do best. If we happen to encroach on the car rental territory, I always say to my stakeholders, ‘It’s better the disruption [if any] happens within the Tan Chong Group compared to an external player disrupting you from outside’,” added Cheah.
Nuances of the P2P model
Meanwhile, Kwikcar co-founder and CEO Jared Chan said the startup runs a P2P model which he described as “Airbnb for cars”.
“The difference between P2P and B2C car-sharing platform is that we are able to scale in terms of recruiting cars much faster and more cost-effectively. But also, when you own your own fleet, your cars are always available,” he said.
Founded in late 2017, Kwikcar now has about 1,500 cars on its platform. Its target rental period is one day and above, a key differentiator when compared to other car-sharing platforms that focus on ‘hyper-short’ rental periods.
Malaysia has multiple festive seasons through the year that cause a spike in demand for cars. So, how does Kwikcar manage its supply when some, if not most, of the car owners drive back to their respective hometowns?
“Two months before any festive season, we start acquiring fleets of those who will be in town and not use their cars during the festive period. So, we work backwards,” he said, adding that Kwikcar does a revenue split with car owners who get the bigger cut.
Driving across hurdles
Both GoCar and Kwikcar think car-sharing is here to stay, despite the popularity of ride-hailing services.
The new ride-hailing regulations rolled out by the Malaysian government, which require e-hailing drivers to obtain a licence, indicate that car-sharing services could serve as an alternative transportation option for consumers.
“…because our cars have hire-drive permit, it means that they are for commercial use. We are grateful to Uber and Grab for bringing ride-hailing to Malaysia, because they are the ones that started the on-demand services… they set the ball rolling,” said Cheah.
According to him, both segments complement each other. “To achieve the ultimate urban mobility ecosystem, you need to have all these verticals in place – GoCar, ride-hailing or public transportation can’t do it alone. At every different part of the journey, you need one of these verticals to support you,” said Cheah.
Echoing the same sentiment, Kwikcar’s Chan added that there will always be users who need ride-hailing services for short-distance or point-to-point travels. But those who need to make longer trips or are travelling to multiple destinations are likely to prefer driving themselves.
Asked if the P2P business model should be regulated, Chan says regulation is the way forward but should not restrict the market.
“It should be something that ensures consumer safety, quality services and so on. Most importantly, we want to make sure that the regulation does not hike up the prices, making services/products less accessible to consumers,” he said.
So, if ride-hailing is not the biggest challenge for car-sharing platform operators, what is it? It’s the user mindset, say players.
“We still have some users who basically treat us like car rental companies, which means they have the mindset where they treat the car in whatever way they want and leave it to us to take care of the mess,” said GoCar’s Cheah.
Kwikcar’s Chan added that expectations between car owners and users need to be handled and managed carefully. “The whole idea is that we want to make sure that we serve the community and exist to really offer a better option whether you own a car on not and providing users much more affordable car rental rates than traditional operators.”
Revving up the car-sharing trend in Malaysia
Malaysia has proved to be an untapped market for car-sharing services, especially when South Korea-based SOCAR chose the market as its first destination for foreign expansion in January 2018. The Malaysian operations of the company are helmed by the former Uber Malaysia general manager Leon Foong.
Although it is the newest kid on the block, SOCAR Malaysia has been rapidly expanding its presence across the country. The startup now boasts a fleet of 1,600 cars in more than 800 locations across three major cities in Peninsular Malaysia.
It plans to spread its wings to East Malaysia in the coming months. SOCAR Malaysia is also the first car-sharing platform in the country that allows its consumers to pay through the GrabPay e-wallet.
For Kwikcar, which is currently present in 50 Malaysian cities, overseas expansion may come later as the immediate focus is to grow the business in the startup’s home country.
Chan said Kwikcar has about 45,000 registered users across Malaysia.
“A lot of our growth actually happened organically, and based on our measurements, one out of two users is coming back to use our services – showing that we have a strong product-market-fit,” he said.
GoCar has just launched its very own subscription model that enables users to rent a car for several months. Cheah also hinted that the startup will soon roll out an e-wallet service via a partnership to make the entire car-sharing process even more seamless for its users.
It has about 400 points across Peninsular Malaysia and runs a fleet of about 700 cars. For the next 12 months, GoCar will focus on streamlining its efficiency and effectiveness.
“As we have been growing tremendously over the past few years, there are some operational and marketing leakages so we look to catch up with all these in the coming months. Then, we can have a strong foundation to build better products for our users. We always keep abreast of what’s happening regionally so that when the opportunity arises, we’re able to jump into it,” said Cheah.