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ComfortDelGro’s potential tie-up with GO-JEK: Who stands to gain more?

Local taxi operator ComfortDelGro is tipped to be in talks with GO-JEK for a tie-up to enter the Singapore market. Talks between both entities are still in the early stages, according to TechCrunch’s sources. In a statement, a GO-JEK spokesperson said the company does not comment on rumours and speculation.

Meanwhile, ComfortDelGro has not responded to Marketing’s queries. Earlier this year, ComfortDelGro’s deal with ride-hailing app Uber came to an end, following the latter’s acquisition by Grab.  ComfortDelGro and GO-JEK’s potential tie-up rumour also comes after news broke that Go-Jek is eyeing expansion across Southeast Asia.

GO-JEK has also been ramping up its funding initiatives, securing US$150 million from general trading company Astra International in February. Google also confirmed its investment in Go-Jek, as part of the company’s initiatives to support and participate in Indonesia’s growth. Other tipped investors also include Singapore’s Temasek Holdings and Meituan-Dianping.

Speaking to Marketing on the potential tie-up, Nick Foley, president of Southeast Asia Pacific and Japan at Landor, said the partnership will result in a broader catchment area for ComfortDelGro. This will allow the company to gain immediate access to consumers who do not like taxis and prefer ride sharing options. He added that for GO-JEK, the ComfortDelGro brand affords it the smoothest possible entry to an established market such as Singapore.

For Foley, it is still too early to tell how beneficial the partnership would be as GO-JEK is yet to be widely known in Singapore. What may work on the congested, city streets of Jakarta may not immediately transfer to downtown Singapore.

“GO-JEK feels very ‘local’ and is much more about convenience. Meanwhile, ComfortDelGro is an established brand in Singapore, and out of all the taxi firms, it is seen as the most reliable and probably the most trusted. It is held in greater esteem when compared to others,” Foley said. As such, ComfortDelGro needs to weigh up the potential risk of jumping into a deal with GO-JEK too quickly. Foley added:

While the tie-up makes good sense tactically, strategically however, several variables would need to be better explored.

He is of the view that ComfortDelGro had been agile in how it responded to the likes of Grab and Uber, and managed the Uber threat well. Compared to other markets in the world, ComfortDelGro is also seen as progressive with its IT systems and booking platforms.

“Whilst the company’s share of the market has dropped, there are a number of strong traits associated with the brand. As such, ComfortDelGro should think twice about letting a new operator from Indonesia get a free ride with the brand in Singapore,” Foley said.

Simon Bell, managing director of FITCH Singapore said the potential tie up would provide benefits for both parties. While ComfortDelGro gets proven technology, GO-JEK gets to enter a new market without the headaches from starting-from-scratch.

“Grab, now a household brand and an effective operator, could be the biggest thorn in this new tie-up as it is savvy and won’t stand still. However, the market should look forward this competition, in the form of price and innovations,” Bell added.

Also weighing in on the matter was Lawrence Chong, CEO of Consulus, who said the potential tie-up would likely be a “formidable” one, given that GO-JEK is a highly competitive player in other markets. The move would also be a good way for GO-JEK to enter a smaller-sized market such as Singapore, making it a “win-win” situation overall.

“This also signals that CCCS’ intervention was not needed because the transportation space will continue to see a lot of competition and is backed by huge funds,” he added.

“Uber’s exit does not make this market less competitive. As such, it is not a given that Grab will dominate, once you are not seen as the ‘underdog’, consumers will likely have higher expectations. Hence, things will not get easier for Grab.”

When asked if there were any pitfalls to the potential partnership, Chong said it is unlikely. Given the situation in Indonesia is far more complex as compared to Singapore, and GO-JEK managed it well, the move into Singapore  is easier in terms of population. Moreover, Singapore’s infrastructure is a conducive one for partnerships to work, Chong added.

As such, ComfortDelGro needs to consider a “whole of transportation strategy”, which involves looking at all modes of transportation which takes consumers from point to point. This includes bicycles, e-scooters, motorbikes, cab, cars or trains. GO-JEK’s agility and speed in taking on anything that moves to deliver people and goods can help ComfortDelGro reshape its approach in this fast-changing sector.

“With Indonesia growing well and right next door to us, not having an entrepreneurial partner for Indonesia at this time will be a missed opportunity. This is the age to be brave and agile. GO-JEK for me represents that spirit,” Chong added.

 

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