Why Uber Will Beat Grab When the Subsidy Party Stops

This following is a guest posted opinion and does not reflect the views of the DemystifyAsia team. To contribute your own guest posts, please get in touch: http://www.demystifyasia.com/contribute/

With the recent  cease fire/merger in China between  Didi and Uber, Uber now has resources and bandwidth to move their battle for global dominance to another locale where  they have not yet cemented their leadership spot. The CEO of Grab, Anthony Tan, believes that the battle between his company and Uber will now intensify.

If Tan is correct that Uber will move their war machine to SouthEast Asia, this will be a battle that will see veritable mountains of money burnt on the altar of user acquisition. While both companies are incredibly well funded, eventually the subsidies (to both passengers and drivers) will end, and Uber will come out on top. Here’s why:

  • Price  – For many products in Asia the cost of a service far outweigh many other considerations when choosing a product or service. At the moment, Grab uses fixed prices meant to entice more users to trust them over Grab. Frequent references of fixed prices are used in their marketing splashed all over cities. This does give Grab a slight advantage, now, but there’s a huge challenge with this pricing model: it counters how drivers need to be paid.Drivers need to earn a certain amount of money per hour or day, and fixed prices will depress their hourly earnings when the unexpected happens like traffic. To make up for it, Grab offers incentives to drivers which smooth out their earnings. Once Grab can no longer afford to provide these subsidies, they will also likely move to a pricing model based on time and distance just like Uber.Also, while Grab claims to be transparent on pricing, they also have their own version of surge pricing which they don’t always disclose to users. In addition, when comparing Uber vs Grab vs a taxi fare on the same trip Singapore, Uber came out to be less.
  • Technology –  Uber’s ride booking app has been in existence for over 6 years while Grab’s ride booking service has only been around for one. (The Grab taxi booking app has been around for four years) This advantage in time has given Uber so much more experience in developing algorithms to send a driver as fast as possible. In my personal experience, Grab drivers usually take significantly longer to arrive than Uber drivers. Even the arrival estimates in the Grab app appear to be simple guesses vs Uber’s more accurate estimates.The advantage in Uber’s technology will likely to continue to grow as Uber has the entire globe to train their app while Grab only has SouthEast Asia.
  • Global domination – Grab can be used in most major cities in Southeast Asia, which is very convenient for the regional traveler. On the other hand, Uber can be used in nearly every major city across the globe. Just for this feature, the value in at least having the Uber app on your device far exceeds the necessity to have Grab’s app.
  • Customer Support – For whatever reason, Grab’s customer support always seems incredibly backlogged. Typical response time is in days, and I have even had them take two weeks to respond to an issue. Contrasted with Uber’s near instant support, Uber has a significant advantage for anyone that has ever needed customer support after a ride. This seems like another area that Uber was able to optimize and effect through their millions of rides.
  • Cash flow – Most importantly, Uber’s global earnings will allow them to sustain their battle with Grab for as long as it might take them to win. Grab can brag that they might be the #1 booking app in Indonesia, but due to the lower gross price of rides in that country, the total cash earned from rides pale in comparison to what Uber earns in major global cities like New York, London and Los Angeles.

So, take your bet. Who do you think will win?