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Story: Viet Duc
In an age where “technology is changing everything,” Hoang Nguyen – a 28-yearold salesman who lives in Ho Chi Minh City – has given up tech-based ride-sharing services for traditional taxis. Arriving at Tan Son Nhat’s domestic terminal on a typical rainy day in early August, Mr. Nguyen strode to lane D to hail a cab. After only three minutes of waiting for the taxi company’s coordinator to make arrangements, Mr. Nguyen boarded his cab and went home.
“To use tech-based ride-sharing services, I would have had to take the elevator to the third floor. On rainy days, I’d have had to wa the third floor. On rainy days, I’d have had to wait for hours for a cab,” complained Mr. Nguyen.
A frequent user of tech-based ride-sharing services in Ho Chi Minh City, Minh Tu, 32, a sales department manager, had accepted higher fares on rainy days and peak hours as a fact of life. However, in recent months, she has grown irritated by long waits for ride-sharing cars.
“There were days when I couldn’t book a cab with all three major ride-sharing apps, Grab, Gojek, and Be, even from Districts 1 and 3, after waiting for 15-20 minutes. If there were cars, their fares would be higher than traditional taxis,” said Ms. Tu. “Service availability was especially limited during May and June when fuel prices skyrocketed to VND30,000/liter, although things have been easier these past two months.” As such, tech-based taxis are facing two big challenges: price competition and service availability at any time.
WHERE IT ALL BEGAN
When they first appeared, tech-based taxis dealt a major blow to the main weakness of traditional taxis: pricing transparency. When using traditional cabs, passengers have no idea how much they will spend. This limits their travel options, raises concerns over costs, and opens doors for scams and price gouging.
Passengers feel more confident when ridesharing applications provide their full route and rates, allowing them to select the choice that best meets their needs. Furthermore, ride-sharing businesses totally embraced “burn-to-last” methods to win market share. They actively encouraged customers to use their services by giving discounts and promotions that made fares much lower than traditional taxi firms’ listed prices and allowed their drivers to retain a higher commission. Those policies not only stimulated demand but also attracted drivers from traditional taxi companies and a large number of unemployed or semi-unemployed people to become techbased drivers. Ride-sharing companies then fashioned their brand’s image as “available at cheap prices” and pushed the use of tech-based ridesharing services. The rivalry between the two services heated up as both complained repeatedly to the authorities.
During the two years of the Covid-19 pandemic, particularly the second half of 2021, many provinces and cities went into lockdown. Travel demand dwindled and all taxi companies were badly impacted. In 2021, Mai Linh’s staff nationwide decreased by more than 5,000 people, to nearly 18,000 employees, including over 15,000 drivers. Vinasun, a taxi company with a large market share in Ho Chi Minh City and the Southern provinces, lost over 2,500 employees, going down to approximately 1,900 staff in 2020.
After the “burn-to-last” period, tech-based ride-sharing businesses went public and faced huge pressure from investors. An executive at a tech-based ride-sharing firm in Vietnam admitted they could not continue to always “pay a huge amount of money for promotional offers like before”. After their public listing, the financial reports of several large ride-sharing businesses like Grab and Gojek revealed massive losses to acquire a dominant position in the Southeast Asian market. In the first half of 2022, Grab accumulated a net loss of over USD 1 billion, while Gojek’s parent com
To be profitable and cover the costs of entering the market, ride-sharing companies had to raise fares, reduce promotions, and lower their drivers’ commissions. Currently, many companies have implemented higher fares during peak hours, traffic jams, and on rainy days, and even added fees during scorching weather. Passengers’ loyalty, however, is frequently inversely proportional to their fares.
TRADITIONAL TAXIS STRIKING BACK
With their backs against the wall, traditional taxi firms have no other choice but to transform and compete. According to Mr. Ta Long Hy, permanent vice chairman of the Ho Chi Minh City Passenger Transport Association, passengers are increasingly using traditional taxis. This is not only thanks to resumed socio-economic activities that stimulate travel demand, but also to rising numbers of customers choosing traditional taxis over tech-based ride-sharing services.
Mr. Hy, in particular, wishes that consumers would not distinguish between conventional and tech-based taxis since traditional taxi companies are digitizing their services by offering applications for booking with displayed fares and meter readings to allow passengers to compare fare rates. Through this endeavor, traditional taxi firms have overcome their weaknesses and capitalized on tech-based taxi companies’ strengths.
Mr. Ho Tan, a driver for Mai Linh taxi, revealed that 80% of his customers are now booking his services via apps just like other tech-based taxis.
“On rainy days, I can drive non-stop without eating as new orders constantly come in. Customers tend to choose us because techbased taxis are usually more expensive than traditional taxis,” Mr. Tan added.
In addition, many drivers have realized that driving for traditional taxi firms is more beneficial, as tech-based taxi drivers only retain about 70% of their fares after deducting the company’s fees, taxes, and other costs. At the same time, they must have their own car and bear the depreciation cost. Meanwhile, some traditional taxi companies are now covering automobile investment, depreciation, and repair costs, while allowing drivers to receive around 65% of the fares.
In Hanoi, traditional taxi companies, such as the new G7 taxis, also employ integrated methods to increase their car fleet without requiring further investment, thus increasing their service availability to meet customers’ needs at any time. Many Hanoi drivers are abandoning techbased platforms in favor of inter-province carpooling services through forums and websites that provide information on cheap rides. They are turning their backs on ride-hailing but not on the transport business itself, as they seek solutions that best meet their needs and provide a higher income.
Competition in the transportation market remains fierce. Tech-based ride-sharing companies, like traditional taxi companies before them, are now seeking ways to maintain their market share. Despite not reclaiming all market shares, traditional taxi companies have regained a big share of the pie and are in a better position.
