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E-hailing firms may reconsider biz models

The move to regulate the e-hailing industry will likely lead to increased costs and force e-hailing service providers to reconsider their business models to remain viable and sustainable in the market.

Institute for Democracy and Economic Affairs (IDEAS) senior manager in external relations Azrul Mohd Khalib said the burden of compliance and the associated costs resulting from the regulatory requirements will deter a large number of existing ride-sharing drivers, while dissuading potential new recruits to the e-hailing platform.

“The potential drop in drivers will cause ride-sharing companies to re-evaluate their business model and rates,” Azrul told The Malaysian Reserve (TMR) when contacted recently.

“Whether this is sustainable will depend on how many drivers stay on and invest in complying with such regulations, and whether the rates remain competitive.”

Azrul added that e-hailing operators in the country might consider partial or full subsidisation of the compliance costs, though this approach is not sustainable as the amount per driver is considerable.

“A commitment contract — similar to buying a premium handphone — might be used to lock in the period of service from the ride-sharing drivers and regain the investment.”

E-hailing mainstays Grab and Uber presently impose substantial commission rates on drivers, at 20% and 25% respectively.

The new laws — under amendments to the Land Public Transport Act 2010 and Commercial Vehicles Licensing Board Act 1987 — include a separate driver’s permit, annual vehicle inspections, insurance coverage for passengers and third parties, and medical check-ups.

The regulatory requirements are expected to burden ride-sharing drivers — now subject to the same operating conditions as that of taxi drivers — with additional cost and time constraints, both of which will likely reduce their earning capacity.

Azrul said the ride-sharing service providers that deliver the best value to the consumer will stay ahead in the industry.

“Meeting consumer demand determines market share. However, the balancing act between meeting compliance costs and maintaining value and low rates will be challenging,” he said.

On the user’s part, Azrul said they must recognise that ride-sharing is not similar to bus services with low rates.

E-hailing, he said, requires appropriate payment for quality and value-added service.

According to news reports, there were some 77,000 registered taxi drivers in the country at the end of last year (Pic: TMRpic)

Industry players will be given a one-year grace period to acclimatise to the new regulatory framework, which first requires to be technically enforced in Dewan Negara.

Uber Malaysia and Singapore head of communications Leigh Wong said the new laws represent a major milestone in the development of Malaysia’s ride-sharing industry.

“These laws send a clear message that ridesharing is here to stay and will have the potential to go a long way towards solving urban mobility issues and transforming the country’s transportation landscape,” Wong noted in a statement to TMR.

Uber, he said, “stands regulation-ready” to meet the new legal framework.

“Our focus at this time will also be helping driver-partners efficiently and effectively make plans to transition to this new regulatory environment.

“We look forward to continuing our engagement with the government on this,” Wong said.

Meanwhile, Grab Malaysia country head Sean Goh said the local startup company will use the one-year grace period to assist its drivers on its platform.

“We thank the government for the foresight in acknowledging that teething problems are inevitable and providing us with a grace period of one year to review our operations and clarify and address any challenges that may come up when implementing the amended regulations,” Goh said in a statement.

“We will assist our drivers in ensuring a seamless transition period, while still benefitting the rakyat.”

The company, he said, intends to continue collaborative efforts with the relevant authorities on the new laws.

“We look forward to continue our efforts to engage and work cohesively with them in all the cities we are currently in and hope to be in to grow our services so that we can continue to provide reliable, convenient, affordable and, above all, safe transport options for all.”

According to news reports, there were some 77,000 registered taxi drivers in the country at the end of last year. In the next three years, it is forecast about 150,000 new Uber and Grab drivers will offer their services to the public.

After almost a year of debate, controversy and a delayed parliamentary sitting, Dewan Rakyat last week passed amendments to transport laws which legitimise e-hailing in Malaysia.


First published in themalaysianreserve.com by Mark Rao, 30 July 2017

2017-07-31T04:45:47+08:00 31st July 2017|News, Advancing a Competitive Economy|Comments Off on E-hailing firms may reconsider biz models