The taxi war has been intense in many parts of the world whether it be US, China, India, MENA region, or the South-east Asia. We saw how Uber started its domination in most of these portions.
We also saw the emergence of the local players from these respective regions defeating and knocking Uber out of their country.
However, there’s been one country whose taxi war scenario has been under the radar. I am talking about Vietnam. A developing nation which is proving to be a taxi haven for the taxi behemoths and entrepreneurs.
There has been a huge surge in the demand of ride hailing services in Vietnam due to the combination of below reasons.
- Increase in the usage of smartphones by the Vietnamese population.
- Entrance of ride-hailing giants like Uber and Grab.
- Emergence of Vietnam’s local ride-hailing companies.
- Implementation of decision No. 24/QD-BGTVT.
- Reduced taxi fare in comparison with the traditional companies.
We’ll discuss about all the above points in detail.
The figures also support this increased demand as the Vietnamese taxi market was projecting a CAGR of 14.86% with total valuation at around 368.5 million USD in the year 2017.
Entrance of ride-hailing giants like Uber and Grab
Uber and Grab entered the Vietnam’s taxi market in the year 2014. They made a huge impact as they transformed how Vietnam’s urbanites commuted on a daily basis.
This was the first time the people of Vietnam were experiencing the travelling which was driven by mobile applications.
In earlier times, the commuters in Vietnam had to resort to bargain with the cab and motorbike drivers.
Moreover, with the lack of any trusted and advanced technological infrastructure, there was a risk of traveling in an illegal taxi which could probably take a longer route than usual.
But with Uber and Grab all these risks were eliminated as they made all the essential details visible like the driver’s name, vehicle’s number plate, vehicle type, route taken, and many more.
Uber didn’t last long in Vietnam as it sold all its business to the Grab. This move gave Grab a huge boost to spread its business all over Vietnam.
Just after five years of launching their services in Vietnam, Grab now boasts its presence in 43 provinces and cities of the country.
It has a massive network of around 190,000 cars and bikes that provide ride-hailing and food-package delivery services.
The success of Grab and Uber laid a foundation for not only all the existing taxi companies but also for the upcoming local cab services.
Emergence of vietnam’s local ride-hailing companies
Mobile-app based ride hailing companies have surely gained the momentum in Vietnam. However, there is still a large fraction of people who call taxis by either making calls or simply hailing on the streets.
Before the app-based taxi services came in Vietnam, the country already had two prominent names in the taxi industry. These were Vinasun and Mai Linh.
These two companies are a familiar name for anyone in the Ho Chi Minh city as they dominate the city’s taxi industry.
Diving deep into the performances of the Vietnam’s native taxi companies, we found that more than 200 firms including big names like Mai Linh and Vinasun had the contribution of more than 50% of the total Vietnamese taxi market in 2017.
Vinasun being the top-ranked company, while Mai Linh which has the largest taxi fleet of about 15,000 cabs managed only 11%.
The wide gap between the contribution of Vinasun and Mai Linh is due to the entry of Taxi behemoths like Uber and Grab in 2014.
The emergence of Uber and Grab had the most adverse effect to the Mai Linh Group as it saw a continuous decline in the total number of its employees from 24,000 to 6,000 in the span of 3 years from 2014-2017.
This decline in the workforce also translated into their total revenue and this is perhaps why they were on the second spot with a meagre 11% share of the total Vietnamese taxi market in 2017.
However, Mai Linh was not the only company to face the wrath of Uber and Grab. Vinasun also witnessed a similar decline in their workforce to almost 10,000 in 2017.
However, they continued to make profits by majorly operating in the Ho Chi Minh City, where the demand of taxi is highest among the other cities in Vietnam.
The taxi scene in Vietnam is going to become even more interesting as new ventures have started investing in it. Recently, 17 Vietnamese taxi companies have set a precedent by coming together to fight against the ride-sharing services.
They recently unveiled their taxi booking app EMDDI. This union of 17 companies now together have over 12,000 cabs in their fleet with a reach of 40 out of 63 total provinces of Vietnam.
The app is said to take only one or two minutes to connect a rider with the driver. Moreover, the fare is said to remain unchanged even at rush hours.
Moreover, like Grab the app will also show the driver’s identity, license number, booking time, route, and other details which can be later used as evidence against the driver in case he/she is accused of overcharging
Implementation of decision No. 24/QD-BGTVT
Decision No. 24/QD-BGTVT is nothing but a pilot scheme introduced by the Vietnam’s government for ride-hailing services in which they are permitted to operate in five cities and provinces in a stipulated period.
That period started from Jan 2016 to Jan 2018. Grab and Uber were the only two companies which were using ride-hailing applications during this period.
But since then the Vietnam’s government has struggled big time to amend the laws for the ride-hailing businesses.
At last, they came up with a decision where the ride-hailing services were subjected to come up with the same requirements as that of the taxi companies.
After repeated revisions and endless debates among government officials, the latest proposals specify that all the cabs using the ride-hailing services must carry roof-signs similar to those of traditional taxi cabs.
The current scenario
After the end of the ride-hailing pilot scheme on Jan 2018, Vietnam’s government decided to consider all the ride-hailing firms that only provide the application or the software but also handles the entire transportation process as a transportation company.
Vietnam’s Ministry of transport which is also known as the MoT has temporarily kept Grab and other ride-hailing firms in the same category as that of the traditional taxis until the revision of the law is completed.
The MoT submitted its report on this matter in the National Assembly. The reports states that the conclusion of the two-year period of pilot scheme has seen a total of 14 ride-hailing companies in Vietnam, which includes 13 local and one foreign company that has over 46,000 drivers as partners.
The report also said that the fierce competition between the app-based ride-hailing services and the traditional taxi services has adversely affected the latter.
Moreover, it also mentioned that there’s a serious lack of regulations when it comes to the ride-hailing services.
It also pointed out the fact that there were some ride-hailing firms that have not fully complied with the law. For example, some haven’t installed any light-box, some have evaded tax, and some are with inappropriate contracts.
Nguyen Van of MoT said that there were two types of ride-hailing firms. First, which just provides a ride-hailing software or application as a platform for the riders to connect with the drivers.
These companies don’t have any say in the management of the vehicles, hiring of drivers, and setting up the fare rates. They simply receive commissions from the bookings.
The second type however, takes full control of the operation which includes hiring of drivers, deciding fare rates, and managing cabs.
Now let’s talk about the two most important cities of Vietnam which is the home of most number of taxis and taxi companies whether traditional or ride-hailing.
Hanoi’s taxi market stands at the second spot after Ho Chi Minh City with a valuation of USD 152.40 million for the year 2017.
As much as 80 taxi companies dominate this region which includes the likes of TaxiGroup (operates both Taxi CP and Taxi Hanoi) and Mai Linh.
Hanoi’s popular taxi company Mai Linh has the largest taxi fleet in the Vietnam with around 15,000 cabs out of which nearly 9,000 are operational only in Hanoi.
Hanoi city became a successful city for both Grab and Uber by 2017 since both companies operated around 11,400 and 2,400 cabs respectively.
Hanoi city is the home of around 30,000 cabs out of which 19,000 are the traditional taxis operating under 77 enterprises. The remaining ones are operated under ride-hailing companies.
The fierce competition of taxi companies resulted in increased traffic jam. This forced the city transportation department to impose a polite ban on nine-seater transportation cars operating under app-based ride hailing companies (Uber and Grab) for one month on 13 streets starting from Jan 11 2018.
Moreover, the city administration also decided that all the traditional taxi companies will remain unchanged until 2020.
This decision was taken under the Hanoi city’s taxi management plan. This implies that no taxi firm could expand their fleet pre-2020.
Similarly, no new licenses would be allotted for the new taxi cabs under the pilot program of Hanoi’ MoT to keep a check on the unfair competition between the ride-hailing companies and traditional companies.
Ho chi minh city
Ho Chi Minh is the leading city in Vietnam’s taxi market. It experienced a huge surge in the 2017 due to the ride-hailing pilot program.
This had an adverse effect on the traditional companies, as their number dropped from 36 in 2010 to 20 in 2018.
By the year 2017, the total number of taxi cabs operating in the city reached to as nearly as 40,000. If we bifurcate this number then we get almost 9,000 traditional taxis and 28,000 cabs operating under ride-hailing companies like Uber and Grab.
This number is predicted to go up with years to come. That’s why the city transportation department taking inspiration from their counterparts in Hanoi have stopped licensing the new cabs operating under both ride-hailing and traditional companies.
Talking about the best performers in the city, Vinasun comes first with a major market share which is nearly half of the city’s total market from 2014 to 2016.
Vietnam is surely a new but a promising territory when it comes to the ride-hailing businesses.
The continuous penetration of smartphones have facilitated a huge opportunity for all the established as well as the startup companies to begin their ride-hailing business in Vietnam.
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