Ride-hailing firm Grab plans major investment in the multi-billion dollar Vietnamese market

The Singapore-based transportation network, Grab Holdings Inc., has centered its focus on ride-haling services alongside food deliveries and has become the Southeast Asia’s biggest start-up with an annual revenue of 1 billion USD, as of December 2018. The fast-growing company is now set to invest “several hundred million dollars” in Vietnam where the company regards as its next major growth market. Just a few weeks ago, they announced a 2-billion USD investment in Indonesia. The company, which has more than 4.5 million drivers in the region, aims to double its revenue to 2 billion USD this year.

The proposed investment is the latest example of a regional brand deepening its commitment to Vietnam, which is a market that shows similar characteristics to Indonesia. The nation’s GDP outlook seemed to be stable with a greater purchasing power of its citizens, but the nation still lacked personal rides which in effect could assist the company to find itself as the favorite in the Vietnamese ride-sharing market. Research has shown that 99% of respondents use online food delivery services at least 2-3 times a month and 39 % usually order food via a mobile app 2-3 times a week.

The food delivery market is witnessing cutthroat competition among the major players. GrabFood, GoViet,  and Vietnammm are battling each other at every turn as the market has been reshaped since the beginning of 2019,  as some companies, such as Lala, disappeared from the market entirely in 2018 after only half a year of operation.

However, competition is on the move, as Go-Jek, the Indonesian sister of Go Viet, is evolving from ride-hailing app operators to become a one-stop shop for various services including payments, food delivery, logistics and hotel bookings in Southeast Asia. Their investments aim to build a next-generation transport network and, in the meantime, redesign the delivery of key services such as healthcare.

While established competitors are developing multiple services from food delivery, GrabFood draws advantages from its mother company Grab – the biggest on-demand ride-hailing service in Vietnam. This helps GrabFood take advantage of both a wide driver-partner and customer network. Thanks to these two factors, it also received secondary advantages such as fast delivery as well as a significant increase in incremental revenue from joining the platform. Grab, as an app, quickly attracts users and investors. Analysts estimate that Grab is valued at 6 billion USD and it can count on Toyota, Microsoft, China’s Didi Chuxing and Hyundai among its backers.

The latest to join in is Vietjet,  providing express air delivery service. Their target is to develop solutions for connecting road and air travel to customers across Southeast Asia. Last week in HCMC, a Memorandum of Understanding was signed  for a partnership allowing Vietjet and Grab to develop low-cost solutions with the technological advantages brought about by the partnership. The two companies are trying to lower the costs and providing a more convenience service, which also aims to expand the co-operation in other Southeast Asian markets.

A well-established partner is the Vietnamese fintech firm Moca, which joined forces for the launch of the digital wallet. By developing GrabPay they had access to valuable data insights on both customers and drivers. Grab is also betting on its payments business to grow in financial services and wants to use those insights to create specific financial products including insurance, credit and ultimately wealth management offerings. By expanding its business, Grab would have to compete against more rivals engaged in online payment, for example in Vietnam the big rivals – Sea and Alibaba, both of which have strong support from two popular e-commerce platforms, Shopee Vietnam and Lazada Vietnam.

In its mature ride-sharing business, the company is profitable in several markets but currently Grab has no specific plans for an IPO.