Possible tie-up with Uber leads to increase in shares for ComfortDelGro

Yesterday, news broke that ComfortDelGro Corporation had signed an “exclusivity letter” with Uber. The talks were regarding the formation of a “potential strategic alliance” for the management of fleet vehicles, and booking software solutions in Singapore.

According to an article on Channel NewsAsia, this led to the stocks of the taxi operator increasing a good 8.76% to conclude SG$2.36. The alliance would see ComfortDelGro’s fleet of more than 15,000 vehicles be made available on Uber’s app.  According to the announcement on Singapore Exchange, ComfortDelGro believes the potential strategic alliance will “strengthen” its position as a “major mobility service provider” in Singapore.

While many were surprised by the move, Lawrence Chong, chief executive officer of Consulus said the move was expected, given ComfortDelGro is one of the last taxi operators to have tied up with a major ride-booking app.

However, he was quick to add that the company needs to holistically rethink its entire business model, as it is the largest operator for taxis in Singapore.  It needs to revaluate not only how it shifts with consumer habits but also rethink its relationship with internal staff, operators and drivers.

“The company has to reassess its role in the rapid transformation that is impacting how Singaporeans move, and use a total value chain approach to redesign its value,” he said.

Prantik Mazumdar, managing partner of Happy Marketer, deemed it a “desperate move by Comfort to counter the existing partnership between Grab and the other local taxi companies”. He added that it is worrisome that such a deal, could indicate that Comfort is not willing to invest in its own innovation and may just become a player that supplies inventory to the system.

As for Uber, he added this could be a positive move as it could gain access to a large fleet and consumers would benefit with additional options. This would also shed a positive light on Uber and portray the company, often surrounded by PR issues, as "cooperating" with the taxi community - which has been a major opponent for them globally.

The future of the taxi industry

“In a way [the move by Comfort] also signals that if you can't beat them, join them,” Mazumdar said, adding that the partnership will at least help Comfort monetise its existing fleet of 15,000 taxis by leveraging on Uber's booking platform, as well as data management solutions.

“If the taxi industry is to survive another decade, operators have to innovate through technology, people and partnerships,” Mazumdar said. These companies need to invest in their own R&D or license technology that helps them with booking, dynamic pricing, pooling, increase of utilisation rates through delivery offerings as well, preparing for the upcoming driverless era.

Moving forward, companies will need to motivate and train the driver community to be more professional and service oriented. Another area worth venturing into would be creating meaningful partnerships with adjacent businesses such as MRTs, hotels, schools, airlines and others to be potential feeder systems to make the most of all their land transport assets.

“It's an uphill battle but one taxi operators must prepare to fight sooner than later,” Mazumdar added.