Uber may be making global headlines with its upcoming initial public offering, but on the ground in south-east Asia it is a distant memory. 

The US-based ride-hailing company cleared out in March last year, selling its regional business to Grab. But the vacuum created by Uber’s departure has not been filled entirely by the $14bn Singapore-based firm — competition from Indonesian rival Go-Jek has stiffened, with Vietnam emerging as a key battleground. 

An FT Confidential Research survey of 5,000 urban consumers across Indonesia, Malaysia, Thailand, the Philippines and Vietnam suggests ride-hailing customers benefit in markets where Grab and Go-Jek are in direct competition. But regulatory change is afoot, and that could mean higher prices ahead. 

Our survey found appetite for ride-hailing services growing from a year ago, with consumers in all countries except Malaysia making greater use of motorbike and car-hailing services. 

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Usage has risen despite consumers saying that, excluding promotions, fares have become more expensive. Thailand is the only outlier, with customers there perceiving that prices have remained largely unchanged. 

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Consumer perceptions of rising fares resonate with concerns among national regulators that Grab’s virtual monopoly position in some countries can mean higher prices. In the Philippines, where Grab dominates car-hailing (it stopped offering motorbike-hailing after a government ban), prices were seen to have risen fastest. 

Among Asean-5 countries, the Philippines is the only one so far to have completed antitrust investigations regarding the merger of Grab and Uber’s operations, approving it on condition that Grab pledges to maintain pre-merger price levels. 

As with Filipinos, respondents in Malaysia, where Grab also dominates, said higher prices had not been offset by more generous promotional fares. As far as consumers are concerned, ride-hailing companies in these markets — meaning Grab, for the most part — have not become any more generous with their promotional campaigns. 

But in Indonesia, consumers perceive that ride-hailing firms have become more aggressive in offering discounts and other deals. Results from Vietnam also suggest that consumers there are benefiting from more promotional offers. These are the markets where Grab and Go-Jek are competing head on. 

Go-Viet making inroads 

Go-Jek launched in Vietnam in September, its first overseas foray, followed by moves into Singapore and Thailand. In Vietnam, where it operates under its local brand name Go-Viet, Go-Jek has made inroads with its motorbike-hailing service, where demand is high and red tape non-existent. Among respondents to our survey, 40 per cent said they had used Go-Viet’s motorbike-hailing services, second only to Grab’s 72 per cent. 

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Go-Viet managed to obtain a car-hailing licence last month, valid only for Ho Chi Minh City for now. Nonetheless, Grab’s weekly promotional activities — $1 to $2 discounts per ride are normal in a country where people generally spend less than $3 on daily transport — suggest the company is anticipating Go-Viet’s imminent entry into the market. 

Even if all necessary permits are in place soon, Go-Viet will need to move aggressively to recruit a pool of drivers and build a fleet, and that means offering more attractive commission packages than Grab or Be, a local upstart. For Vietnamese consumers, short waiting times are nearly as important as cheap fares, and both are considered far more important than the driver’s attitude or the convenience of payment options. 

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Regulatory bumps 

Go-Viet is entering an industry in regulatory flux. Since 2015, ride-hailing firms have been treated as technology providers rather than transport firms, allowing them to enjoy exemptions from the stringent operating rules and tax obligations that govern taxi companies. 

The local taxi industry has spent years pushing for change, tasking the government with the difficult balancing act of trying to appease cabbies and level the playing field while still supporting the digital economy

Regulatory uncertainty now looks to be ending, broadly in favour of the taxi companies. In December, Grab lost a case against local taxi group Vinasun in which the court classified Grab as a transport company. The transport ministry last month submitted a long-awaited draft regulation to the prime minister’s office for approval proposing that car-hailing companies be classified as transport entities. 

Although deliberations are still under way, it is clear that ride-hailing firms will soon be operating within tighter regulatory constraints in Vietnam, and this will mean bigger costs that the companies will have to bear or pass on to drivers or consumers. 

This will only complicate Grab’s path to profitability in Vietnam. The company has invested more than $100m in the country since it launched in 2015. Since then, the app has diversified into motorbike-hailing, delivery and a digital wallet, spending heavily to attract users. 

Vietnamese consumers could be forgiven for thinking that the increased competition resulting from Go-Jek’s arrival would mean cheaper fares. Instead, tighter regulation could mean pricier rides.

scoutAsia is a corporate data and news service from Nikkei and the FT, providing in-depth information about more than 660,000 companies across more than 20 countries in East Asia, South Asia and Asean. This exclusive scoutAsia Research content has been produced by FT Confidential Research

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