Scooter-drivers in bright-green helmets enliven the dusk of rush hour in Ho Chi Minh City, Vietnam’s commercial center. This conspicuous fleet is carrying clients of Grab, a Southeast Asian ride-hailing firm. Its operations, connecting travelers with taxis, private cars and motorbike taxis in six countries, straddle a region that is twice as populous as America and swiftly urbanizing. Its future seems assured…if it can compete with Uber, its deep-pocketed American competitor.
Grab started life at Harvard Business School, where 34-year-old Anthony Tan met his co-founder, Hooi Ling Tan, to whom he is not related. Its headquarters are in Singapore. Anthony’s father runs Tan Chong Motors, a car assembler and distributor which is among Malaysia’s largest companies, but he does not have funding from the family business.
Tan denied that he is building Southeast Asia’s answer to Uber, saying that he is more inspired by Chinese technology companies such as Tencent, the online-gaming and social-media giant that owns We Chat, a fantastically popular mobile-messaging service, and Alibaba Group, an e-commerce giant. In particular, Grab aims to emulate We Chat’s success in popularizing mobile payments through smartphones.
A big chunk of the $1 billion of cash that Grab holds for investing purposes will be plowed into its digital-payments system, “Grabpay,” which started operating in January 2016. In November 2016 Grab updated Grabpay, turning it from a digital-payments processor, which was mostly of use to people who already had credit and debit cards, to a digital wallet which Southeast Asians can top up with credit by making cash payments at banks and some convenience stores. At present people use Grabpay mainly to pay for Grab rides, but the aim is that customers eventually will use it to buy all manner of daily items.
Such dreams depend, however, on Grab fending off local rivals and defending its business from Uber, which is roughly 20 times as valuable. Grab’s investors include Temasek, Singapore’s state investment firm, and China Investment Corporation, a Chinese one. In September Softbank—a Japanese telecommunications and technology company that is owned by Masayoshi Son, who last year announced a $100-billion tech-investment fund in partnership with Saudi Arabia and other investors—led a group that put $750 million into Grab, valuing it at more than $3 billion.
Indonesia is a key battleground, with its population of 257 million accounting for more than one-third of the region’s people. Since launching its motorbike taxis in Jakarta in May 2015, Grab gradually has eaten into the lead formerly enjoyed by Go-Jek, a local ride-hailing business, and seems to be drawing ahead. Uber, which came late to the market, is now in third place. On February 2 Grab said that it will invest $700 million into Indonesia during the next four years.
For Grab, Tan said, Southeast Asia’s traffic-clogged mega-cities are not “just another” market: “This is our home.”
© 2017 Economist Newspaper Ltd., London (February 11). All rights reserved. Reprinted with permission.
Image credits: Greg Baker/Agence France-Presse/Getty Images, Greg Baker/Agence France-Presse/ Getty Images