Southeast Asian ride-hailing major Grab on Wednesday announced a strategic investment from Toyota Tsusho, the general trading arm of Toyota Group, as part of an ongoing financing round which is targeting to raise a total of $2.5 billion.
The investment was conducted through the Japanese company’s Next Technology Fund and is the latest participant in Grab’s current financing round, led by Didi Chuxing and SoftBank. This financing round was announced in late July 2017 and is yet to be closed.
The Grab investment forms Next Technology Fund’s first deal since Toyota Tsusho launched it in April 2017. The fund was created to enter new markets and invest in innovative technologies, products and services. Toyota Tsusho also established the Next Mobility Development Department in April 2017, which reports directly to the Chief Technology Officer, to spur the development of new mobility businesses.
With advancements in digital technologies and the increasing usage of smartphones, there has been a significant growth in the adoption of on-demand transportation services, such as ride-hailing services and taxi dispatch services. Southeast Asia, in particular, has seen the rise of Go-Jek and Grab, who compete with Uber Technologies in the region.
In an official statement, Anthony Tan, Grab’s CEO and Co-Founder, said, “It is an affirmation of our hard work, leading position and Southeast Asia’s enormous growth potential. We look forward to working with Toyota Tsusho to move Southeast Asia forward.”
The strategic investment is accompanied by the launch of a new data collaboration initiative with Toyota Group for connected car services that has seen Grab sign MOUs with Toyota Motor Corporation, Toyota Financial Services Corporation, and Aioi Nissay Dowa Insurance Co., Ltd.
These agreements will see Grab share data on driving patterns from 100 Toyota cars in Grab’s fleet with Toyota, who will then analyse the data captured and offer recommendations on how Toyota’s other connected car services on the Toyota Mobility Service Platform (MSPF) can enhance the Grab experience for drivers on the Grab platform.
“Through this collaboration with Grab, we would like to explore new ways of delivering secure, convenient and attractive mobility services to our fleet customers in Southeast Asia,” said Shigeki Tomoyama, Senior Managing Officer of Toyota Motor Corporation and President of the Connected Company.
Grab claims to be the leading on-demand transport network platform in Southeast Asia with a market share of 95 per cent in third-party taxi-hailing and 72 per cent in private vehicle hailing.
Findings by market research firm TNS, Grab has substantial brand strength in Singapore, Indonesia, Philippines, Malaysia, Thailand and Vietnam, compared to other ride-hailing apps and taxi booking apps. Its app has been downloaded 55 million times and is reportedly used by more than 1.2 million drivers across 87 cities in seven countries in Southeast Asia.
2017 has seen Grab seek to deepen its presence in Myanmar, while also competing with Uber and Go-Jek in Indonesia, the region’s largest economy, for greater market share.
This strategic investment by the Toyota conglomerate synchronises with its ambitions to build up its own connected automotive ecosystem, which has been challenged by the developments arising from Apple and Google, who are seeking to extend their presence into the automotive sector.
It is also part of a long-term plan by Toyota to retain customers, given that connected customers often remain tied to corporate services and networks, and accounts for the shift to transport-as-a-service, which offers a higher margin opportunity for automotive players.
Management consultancy Arthur D Little estimates in one report – “Automotive After Sales 2015” – that the global automotive aftermarket is worth $800 billion annually. At a time that sees rapidly declining profit margins in new car sales globally, coupled with the extension of car life cycles, the after sales business is increasingly crucial to automotive majors. This investment positions Toyota to build its capabilities and control a larger portion of this market.