Will Uber and GrabCar dent ComfortDelGro’s profits?

The taxi operator should be worried, analysts warn.

ComfortDelGro (CDG) remains unfazed by third party unregulated private-hire taxis popping up left and right, and with good reason. Despite the debut of service providers such as GrabCar and UberX, CDG’s idling taxi rate sits at zero and there’s still a queue to hire the company’s taxi vehicles. It even saw a 9% YoY growth in taxi operating profit. As company management stated, the impact of unregulated private-hire taxis is negligible thus far.

OCBC analysts are singing the same tune, citing that fleet expansion coupled with renewal of taxi fleet in Singapore will continue to drive CDG’s taxi revenue growth on increased rental rates. Further, CDG already has the capacity to break into the private-hire taxi industry with its fleet of older vehicles if not for the risk of affecting its core regulated taxi business by running afoul any regulations.

On the other hand, CIMB analysts note that while CDG’s 9M15 profitability appeared unaffected, Uber and GrabCar’s burgeoning popularity is a threat that might not be negligible for long. CDG’s taxi revenue growth has become sluggish in the past few months, and ground checks revealed that it’s now more enthusiastically pushing its referral incentive scheme to recruit taxi drivers, as management observed a shorter queue of applicants for its taxis. Moreover, CIMB analysts venture that CDG will struggle in enforcing its taxi hirers’ compliance with the LTA’s Taxi Availability Standard, a prerequisite for annual fleet expansion of up to 2%.

In either case, CDG’s best bet for increased profitability continues to be possible legislation to either regulate or deregulate all taxi service providers.