Vietnamese ride-hailers choose niche play to avoid faceoff with cash-rich decacorns

Nguyen Van Vinh, a 32-year-old blue-collar worker, became a GrabBike driver in Hanoi a month ago. “My friends told me driving for Grab could help earn more money, so I applied,” Vinh said, although he is aware that there are other local ride-hailing apps in the market.

It is not hard to figure out why. Grab, which entered Vietnam in 2014 and acquired Uber’s Southeast Asia business in 2018, commands a 73 per cent market share in Vietnam (based on completed trips), according to ABI Research’s Vehicle and Mobility report released last month.

Its Indonesian rival Gojek, which officially launched its Vietnam affiliate Go-Viet in Ho Chi Minh City in August 2018, acquired 35 per cent share in the motorcycle taxi segment in the city within a month of operations.

The dominance of regional ride-hailing giants notwithstanding, Vietnam has at least three local players who are hoping to tap into the ride-hailing market that is poised to touch $4 billion in gross merchandise value (GMV) by 2025, according to the Google-Temasek-Bain eConomy SEA 2019 report.

But, forced by competition, inability to burn cash to gain scale and a funding deficit facing smaller players, the new entrants are tweaking their strategies to avoid a direct confrontation with their cash-rich and dominant rivals.

Take, for instance, MyGo, launched by state-owned ViettelPost in July 2019. It claimed that it will offer ride-hailing and delivery services with a partner base of nearly 106,000 drivers. Shortly after the launch, however, the app has been integrated only into ViettelPost’s last-mile delivery operation, SSI Research analyst Nguyen Hoang Giang wrote in a note.

A spokesperson of ViettelPost confirmed that the company is currently focusing only on delivery services.

ViettelPost CEO Tran Trung Hung had told DealStreetAsia in an earlier interview that the Viettel-made app would not offer discounts and could not afford to make losses [a strategy adopted by well-funded players in the consumer internet space to rapidly grow user base] as it is a state-owned company.

The SSI Research report revealed that the total expense for MyGo in the third quarter was as little as 1 billion dong ($43,000). Compare that to Grab, which has committed to invest $500 million more to build its ecosystem in Vietnam.

In the case of Hanoi-based FastGo – in which VinaCapital Ventures invested a modest sum [compared to ride-hailing industry standards] said to be in the seven-digit USD range – has missed its next fundraising target timeline. FastGo had targeted to raise up to $50 million in a round that was scheduled to have been closed in the first quarter of 2019.

FastGo founder and chairman Nguyen Huu Tuat told us that several investors are doing due diligence for the round, which is slated to close by the end of this year.

Seeking momentum amid a dearth of funding, it has recently secured a partnership with local conglomerate Vingroup that will see the latter sell and lease the VinFast-branded cars to FastGo drivers. Tuat said his strategy was to build a hybrid model blending traditional taxi with e-hailing to become a low-cost carrier.

However, the challenge in implementing this project is the insufficient supply from FastGo. It is hardly possible to book a ride on FastGo app, nor to see a FastGo uniform on the road.

On the busy streets of major cities, people can easily spot the green and red jackets and helmets of Grab and Go-Viet drivers serving riders or queuing for food orders. They have been joined by the yellow uniforms of BE Group, a Ho Chi Minh City-based company that claimed to have invested several hundred million dollars into the venture.

That said, BE still has far fewer drivers at 30,000 compared to Grab’s over 200,000 and Go-Viet’s 125,000.

Charting its way in a less crowded territory, NextTech Group, the parent firm of FastGo, has also launched a multi-service concierge platform, HeyU, to cater to on-demand niches of errand helpers and grocery shopping, a segment not yet tapped by Grab and Gojek in Vietnam. HeyU is seeking $3 million in a pre-Series A funding, according to an announcement.

The decacorns’ aggressive play

One of the biggest challenges faced by local companies is lack of experience, opined Ashish Kanchan, managing director of Kantar TNS Vietnam. “Regional players like Grab and Gojek are ahead on the experience curve since they have been operating and learning in their home markets for a while before thinking of expanding overseas,” he said.

These companies, with their own ecosystems already in place as well as economic scale, are more easily able to attract talent and advance in innovation.

New players in the market, Kanchan said, should establish deep consumer insights to come up with a very compelling message for customers and create a strong brand positioning.

“If competitors only focus on the market leader, their product offer will also look similar over a period of time,” he said.

Grab and Gojek, whose founders Anthony Tan and Nadiem Makarim were fellows at Harvard Business School, respectively possess market shares of 11.4 per cent and 5 per cent of rides completed in the Asia Pacific, per the ABI Research report.

“Vietnam is a vibrant, competitive landscape,” Russel Cohen, head of regional operations at Grab, told us in a recent interview. “Vietnam is one of our fastest-growing markets. We continue to see great macroeconomic trends in Vietnam as a young, technology-literate population.”

GrabFood alone grew 400 per cent with a daily average of 300,000 orders in the first half of this year. In addition, 35 per cent of the transactions on the Grab platform are cashless. GrabPay by Moca, a partnership between Grab and local e-wallet Moca, has grown 150 per cent in transaction volume within the said period.

Regional rival Gojek’s affiliate Go-Viet has seen a similar growth with a 400 per cent expansion after a year of operation. GoFood is seen as its best performer having connected around 70,000 merchants to its platform and growing as much as 35 per cent every month.

“Their (Grab’s and Gojek’s) investments are a great challenge to local businesses,” said Tuat. “In some sense, while transport regulations are vague about antitrust and anti-dumping, their pricing play is unhealthy competition.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.