Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

'Fifty drivers fight for one order': Southeast Asia gig economy slammed by virus

Stock MarketsJun 11, 2020 05:46
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. An online motorbike taxi driver uses his smartphone while waiting for customers in Jakarta 2/2

By Fanny Potkin and Gayatri Suroyo

SINGAPORE/JAKARTA (Reuters) - Indonesian motorcycle taxi driver Aji chain-smokes and checks his smartphone constantly while waiting for orders by the roadside in downtown Jakarta on a hot June morning, but is staring at the prospect of another fruitless day.

Before the coronavirus outbreak hit, the 35-year-old father of four would ferry at least 20 passengers for a daily income of between $13 and $20 as a driver for homegrown ride-hailing app Gojek.

But when transportation services halted under a city lockdown, Aji considered it a good day if he got more than two food delivery orders, which pay him $0.70 each time. On some days, he has had none. Even with restrictions eased this week, he is struggling to feed his family.

"The situation is that there are many drivers but orders are few," he said, asking to be identified only by his first name.

Eleven drivers for Gojek and Grab, which is backed by SoftBank Group (T:9984), in Indonesia, Vietnam and Thailand told Reuters they've similarly struggled, with income slashed by more than half as the pandemic batters Southeast Asia.

And, disappointingly, for both drivers and the companies, an increase in food deliveries - forecast as a major growth area for both firms - has come nowhere near compensating for the losses in transport.

Even in Vietnam, seen as a recovery success story, drivers are reeling.

"The pandemic may cost me and many colleagues our vehicles, which we had bought using borrowed money," said Grab car driver Tung in Hanoi, fearing that lenders may repossess the vehicles.

Unions representing Gojek and larger Singaporean rival Grab, Southeast Asia's most highly valued startup at $14 billion, say thousands of drivers are in the same situation, especially in Indonesia, both firms' largest market.

CORE PROMISE

Their plight threatens a core promise of both companies: that they can improve the lives of tens of millions of people across Southeast Asia even as they provide big paydays for their blue-chip corporate and financial investors.

Southeast Asian governments have warned millions could end up jobless as a result of the outbreak.

The two firms told Reuters they are supporting drivers with measures ranging from food packages and vouchers to low-interest bank loans and car rental rebates. But the crisis has also led them to cut the subsidies that have fueled their growth.

Doubts have also crept up about the ride-hailing model globally and on whether investors will continue pumping in massive funds into the startups.

Even before the pandemic, Grab and Gojek - like Uber (N:UBER) and Lyft (O:LYFT) in the United States and other ride-hailing firms around the world - were operating at a steep loss.

Grab co-founder Tan Hooi Ling has warned the company may potentially face a "long winter".

Both companies still have plenty of cash. One source with knowledge of the matter said Grab has $3 billion in reserves. Sources familiar with Gojek's finances said it was finalising an over $3 billion investment round at a $10 billion valuation; Facebook (O:FB) and Paypal (O:PYPL) announced investments in Gojek's fintech arm just last week, and it also counts Google (O:GOOGL) and Tencent (HK:0700) among its backers.

Each has avoided major layoffs so far, though Grab is implementing voluntary unpaid leave for staff and Gojek is reviewing its services. In the United States, Uber, whose Southeast Asia business was bought by Grab, said it would cut 23% of its workforce.

"Transport has fallen off a cliff, food has held steady, while logistics went through the roof and online payments are high... so having a portfolio of products helps," said Gojek Chief Operating Officer Hans Patuwo. "If we were only a transport company, I'd be quite bowled over."

Executives and investors at both firms point to the resurgence of orders at Chinese ride-hailing company Didi Chuxing as cause for optimism.

"The rate of recovery will be mostly dependent on when government lockdowns end," said Grab Operations Managing Director Russell Cohen, noting Grab's transport business had previously been profitable in several markets.

The crisis has revived speculation among investors about a merger of the two firms, which sources say has been discussed in early 2020, but not led to serious talks.

Gojek said any reports of a merger are inaccurate. A Grab spokesman declined to comment.

FOOD DELIVERY

Grab and Gojek have long touted the fast-growing food delivery industry as a big opportunity. But with platforms taking only a 20%-30% commission that is shared with drivers, margins are slim. And growth did not materialise in every market during the lockdowns.

A restaurant chain CEO in Jakarta said food delivery had not picked up in Southeast Asia's largest economy due to people cooking more at home and as most orders traditionally consisted of lunches for office workers, who are now at home.

Aji described food delivery in Indonesia for Gojek as a "fight", with "sometimes 50 drivers for one order", with Grab Vietnam drivers recounting similar experiences.

Even in Thailand, where orders jumped for both Grab and Gojek, profitability remains distant.

According to an April interview with local media by then Grab Thailand chief Tarin Thaniyavarn, food delivery was fast-growing but loss-making during the pandemic, with costs mounting and competition steep.

Tarin said Grab Thailand lost more than $22 million in 2018, while rapid growth led to losses nearly doubling in 2019.

"Imagine last year’s loss-making business growing rapidly in a short period of time, while the business that used to make profits for us is nearly gone," he said.

'Fifty drivers fight for one order': Southeast Asia gig economy slammed by virus
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email