Taxi giant ComfortDelGro Corp has announced on Tuesday (Aug 22) that it has begun talks over an alliance with Uber.
In an announcement, Singapore-listed ComfortDelGro said it has signed a letter with Uber Technologies for “exclusive discussions” on a possible “strategic alliance”.
The move could result in ComfortDelGro’s 15,500 taxis being made available through Uber’s ride-hailing app. It could also result in synergy in fleet management. Uber is estimated to have in excess of 15,000 cars held under fully-owned Lion City Rental.
All other local taxi companies have similar tie-ups with Grab, Uber’s main rival here.
In its statement, ComfortDelGro said it has “signed an exclusivity letter with Uber for exclusive discussions in relation to forming a potential strategic alliance between the company and Uber, which may include collaboration in relation to management of fleet vehicles and booking software solutions in Singapore, including the company’s taxis also being made available on Uber’s app”.
ComfortDelGro said a potential alliance will strengthen its position “as a major mobility service provider in Singapore”.
However, it added that “there is no certainty or assurance that such discussions… will result in any definitive agreement or transaction”, and advised shareholders and investors to act with caution.
Uber said it had nothing to add to the news. And Grab was not immediately available for comment.
But Mr Neo Nam Heng, chairman of diversified motor group Prime which runs a taxi and car rental subsidiary, said: “Everybody is looking for ways to sustain their business. The other cab companies have tied up with Grab, so I guess ComfortDelGro has to do the same.”
ComfortDelGro had previously tried to tie up with British start-up Karhoo, which claimed to be a rival to Uber. But that came to nought when Karhoo closed its Singapore office last year amid uncertainty over its financial viability.
Industry watchers said any alliance could favour Uber more than it will ComfortDelGro.
Singapore University of Social Sciences (SUSS) economist and senior lecturer Walter Theseira said ComfortDelGro “has to ensure they participate in developing and owning the core technologies which are based on predicting, analysing and matching transport demand and supply”.
“If they don’t, they are basically giving up on the future of transport, because the core technologies could be used for all types of land transport solutions,” he added.
“So it’s hard to understand right now if ComfortDelGro will own and develop anything or if they will just become a supplier of vehicles and drivers.”
Research analyst Abhishek Nigam at stockbroking firm Nomura said: “In the short term, it is positive for ComfortDelGro. Its taxi-drivers will see more bookings, and that in turn will mean better hired out rate. Its fleet has come down big time.”
“But in the long term, it gives more power to Uber, as more and more people will use Uber’s app rather than Comfort’s booking platforms,” he noted, adding that this will erode the taxi group’s profit margins, and “it might become merely a supplier of cars”.
That said, Uber needs ComfortDelGro too, noted transport researcher Park Byung Joon from SUSS. “Uber got beaten in China by Didi. Didi’s strategy was to align itself with local taxi companies – not just building its own fleet. This way, Didi was able to build its network quicker and cheaper.
“It looks like Uber is trying to replicate that very strategy here.”
Prof Park added: “Also, it is not a win-win for Uber and Comfort. I’d rather call it a truce talk. Comfort is the taxi company in Singapore. It has to defend its turf. On the other hand, Uber is losing money… so, instead of going head to head, it looks like they are engaged in a truce.”