Vietnam, poised to become a hot market for ride-hailing startups, has a rapidly expanding online economy heading towards an expected $33 billion USD value by 2025. The ride-hailing market alone is likely to be worth $2 billion USD by the same year. This Southeast Asian country has the fastest-growing urban population in the region, paving the way for ride-hailing startups to capitalise on transport provision in big cities.
Grab: A monopoly until now
Grab and Uber both entered the Vietnamese market in 2014, and until its exit in 2018, Uber was the choice of millions of riders. Singaporean startup Grab seized the opportunity to monopolise the market following Uber’s departure. In 2019, a massive network of Grab drivers was providing transport, as well as food and package delivery services, in 43 Vietnamese provinces and cities.
However, Grab has hit roadblocks at the judiciary and regulatory levels, namely fines for breaking transportation regulations as well as an increase in tax from 3% to 30%. This tax increase came about due to court rulings and recommendations that the government change existing rules concerning companies like Grab. Trading as tech companies, these startups benefited from the lower tax bracket, but now that they must trade as transportation companies, their tax bills have sky-rocketed.
Grab’s monopoly was short-lived. Uber’s exit made way for and encouraged new Vietnamese tech startups to enter the lucrative industry. Grab has become somewhat of an outsider in the same way that Uber found itself pushed out of the Southeast Asian market. So who are these new entrants?
Emerging ride-hailing startups in Vietnam
A major player in Vietnam’s nascent ride-hailing market is Indonesian startup Go-Jek. They entered the market differently to Grab, cleverly partnering with local startup Go-Viet and focusing on two-wheeled ride services. Although still playing catch-up to Grab, It is proving to be a strong competitor and, like their rival, have diversified into Fintech in the region. Whether it can capture the mobile payment market in Vietnam remains to be seen.
Be is Go-Viet’s local competitor and managed to garner the larger share of the ride-hailing market in the first half of 2019, according to ABI Research. The Vietnamese startup achieved a share of 16%, leaving Go-Viet in third place with 10.3%. Be launched its mobile payment app in 2019, and is being hailed as the one to watch.
The two most recent apps on the scene in Vietnam are UniCar and ZuumViet. ZuumViet is yet to launch but has published its services on its website, which will include ZuumCar, ZumBike and ZuumLux, ideal for those looking for a luxury ride. UniCar, currently trialling its services in Vinh Town in Nghe An province, plans to expand into tourist resorts in Vietnam. It plans to have a more expansive selection of offerings – UniCar, UniBike, UniFast (express delivery), UniTruck (logistics) and UniRent (Self-drive car rental) are all to become part of the brand.
FastGo, VATO and Aber are three ride-hailing startups that also launched in 2018, on the back of Uber’s exit. Aber’s attempts at differentiation from other apps did not succeed, although the company promises a ‘bigger return’ at some point. A spokesperson admitted that they need to take a different direction amidst some very tough competition. VATO faced similar obstacles, and despite substantial investment, has also conceded that it needs to change strategy.
FastGo, on the other hand, appears to be more of a success story. It was the first Vietnamese transportation app to launch in a foreign market, launching in Myanmar in late 2018. CEO of FastGo, Nguyen Huu Tuat, is extremely optimistic in the face of harsh competition. He stated that “Other companies might have similar ideas and targets, but success lies not in ideas, but in the way these ideas are realised and the leadership’s vision.” The startup has enjoyed support from the public, businesses and media because they add value to the local economy. FastGo works together with, rather than against, traditional taxis, keeping pricing competitive for customers. Its integration of FastProtection insurance on every ride is a unique selling proposition. Healthcare services are part of its plans to ensure that FastGo stands apart from other apps.
Projections for the Vietnamese ride-hailing ecosystem
According to the General Director of Be Group, Tran Thanh Hai, there is still potential for new entrants in Vietnam’s ride-hailing market. Startups like Grab are still receiving massive investment into their services, including their Fintech offerings. The differentiation strategy into Fintech is a common one, and new companies entering the market should proceed with caution to avoid burning money. Knowing the local regulatory frameworks and market conditions could be the key to success, as FastGo and Be have proven.
With many of the startups moving into food delivery, e-wallets, and luxury cars, companies must be mindful of keeping things fresh. Preempting the next new trend, as FastGo has done with healthcare, will give apps a competitive edge. Bui Danh Lien, former chairman of the Hanoi Transport Association, summed it up when he said: “Only businesses with sufficient resources and a wise strategy can stay in and win the biggest market share.”