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Increase in platform fee by Grab
18 Apr 2023 (115 views)  

Grab has 50% market share in the ride hailing market in Singapore. (See link).

It has announced an increase in its platform fee from $0.30 to $0.70. The fare charged by Grab will increase by $0.40 or more.

Several commuters have said that they will move to an alternative platform. I think that they may not find a driver on the other platform, if there is an increase in demand. Each platform has only a fixed number of drivers over the short term.

I suspect that the commuters will have to accept the higher fares charged by Grab.

It is also likely that the other platforms will raise their platform fee, as they also suffer large operating losses.

In the latest financial year ended 31/12/2022, Grab has a revenue of $1.4 billion and a loss of $1.6 billion.

The increase in platform fee will increase the revenue by $1.8 billion (assuming that there is no drop in business). This would wipe out the operating loss.

Furthermore, Grab is cutting down its expenses significantly. It may lead to a profit in 2023 or 2024.

Although the increase in fares will result in a drop of business for Grab, I expect the drop to be modest.

A bigger risk could be a loss of drivers to other platforms. I also do not expect this outcome to happen, as most drivers will probably stick to the Grab platform that they are familiar with.

I may invest in Grab at the current price. (This is a personal view, and is not investment advice).

Tan Kin Lian


 

Increase in platform fee by Grab
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Grab has 50% market share in the ride hailing market in Singapore. (See link).

It has announced an increase in its platform fee from $0.30 to $0.70. The fare charged by Grab will increase by $0.40 or more.

Several commuters have said that they will move to an alternative platform. I think that they may not find a driver on the other platform, if there is an increase in demand. Each platform has only a fixed number of drivers over the short term.

I suspect that the commuters will have to accept the higher fares charged by Grab.

It is also likely that the other platforms will raise their platform fee, as they also suffer large operating losses.

In the latest financial year ended 31/12/2022, Grab has a revenue of $1.4 billion and a loss of $1.6 billion.

The increase in platform fee will increase the revenue by $1.8 billion (assuming that there is no drop in business). This would wipe out the operating loss.

Furthermore, Grab is cutting down its expenses significantly. It may lead to a profit in 2023 or 2024.

Although the increase in fares will result in a drop of business for Grab, I expect the drop to be modest.

A bigger risk could be a loss of drivers to other platforms. I also do not expect this outcome to happen, as most drivers will probably stick to the Grab platform that they are familiar with.

I may invest in Grab at the current price. (This is a personal view, and is not investment advice).

Tan Kin Lian