ComfortDelGro Corporation Ltd: Grabbing more drivers for the taxi industry
- LTA announced that it has awarded Grab a street-hail operator licence starting from 9 Apr and valid for 10 years
- Under the license, Grab has to expand its fleet size to minimum 800 taxis within three years
- Move not surprising given Grab’s previous failed attempt to enter the taxi market via acquisition of Trans-Cab
- Grab’s entry could potentially deliver driver growth for the overall industry; Maintain BUY with TP of SGD1.80
What’s New
Singapore’s Land Transport Authority (LTA) has awarded Grab a street-hail service operator licence, making it the sixth taxi operator in the country. Grab will be required to grow its taxi fleet to at least 800 within three years, with street hail fares aligned to other operators. The move supports LTA’s goal to improve taxi availability, especially late at night. The entry into the taxi market follows Grab’s failed attempt to acquire Trans-Cab back in July 2024 due to antitrust concerns. Recent regulatory changes, including a three-year freeze on new PHC (Private Hire Car) registrations, the extension of taxi lifespan from eight to ten years, and adjusted inspection frequencies that favour taxis, have made the taxi model more attractive compared to PHCs. This is especially so as taxis can serve a shrinking but still sizable street-hail market, with 26mn trips in 2024 representing an annualised fare opportunity of SGD416mn at an assumed average fare of SGD16.
More details here: LTA | GrabCab Pte Ltd Awarded Street-Hail Service Operator Licence, More Choices for Drivers and Commuters
Our views
We believe the main constraint in the taxi industry is the shortage of drivers, as many taxi drivers tend to be older and a significant number left the industry post-COVID, either retiring or switching careers. While Grab’s exact strategy remains unclear, its move into taxi operations suggests improving economics, especially following recent regulatory changes. Grab may aim to grow the overall driver pool by encouraging its existing private hire drivers to convert to taxi drivers, attracted by the potential for higher income through access to the street-hail market. With increased awareness of the higher income opportunity, the broader industry, including ComfortDelGro, could benefit from a return to fleet expansion. Maintain BUY with a TP of SGD1.80.
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