Electric cars change the game

The report "Popularity of motorbike-hailing applications in 2024" recently published by Q&M shows that Grab is still the leading car company, accounting for 42% of Vietnamese people choosing to use motorbike travel services. However, surprisingly, 2 Vietnamese applications, Be and Xanh SM, have excelled in sharing the remaining 2 positions in the top 3, "knocked out" Gojek - the car-hailing application that used to be the strongest competitor to Grab and maintained the second place in the market 2-3 years ago. In particular, Be has risen to 2nd place with a rate of 32% and Xanh SM has reached 19% of the choice points, standing in 3rd place. Notably, not only was it pushed down to 4th place, Gojek's rate is also quite far from Xanh SM with only 7% of regular users.

Previously, when it acquired Uber's operations in Southeast Asia in March 2018, Grab was almost "all alone" in the Vietnamese market. In fact, a number of Vietnamese enterprises have also seized the opportunity to join the race. Notably, Vato - formerly a ride-hailing service called ViVu, was later acquired by Phuong Trang Passenger Transport Joint Stock Company. Phuong Trang announced an investment of 100 million USD, equivalent to more than 2,000 billion VND, to develop Vato. But since then, this application has been operating quite quietly and sluggishly until the second half of 2019 when it made a comeback when it launched food delivery, delivery, and bus ticket delivery services at the same time. After that, FastGo - established from capital from domestic founding shareholders, mainly from Mr. Nguyen Hoa Binh (founder of Nexttech Group) - also brought many expectations when it received a million USD capital from VinaCapital's venture capital fund upon its launch. But now this name is hardly mentioned anymore. Similarly, Go-Ixe, Aber… launched with much fanfare, received much support from consumers when tapping into the Vietnamese mentality of supporting Vietnamese products, but in the end, they had to remain silent.

It was not until Gojek (when it first entered Vietnam, it was called GoViet) that the situation changed a bit. Backed by its parent company - the Indonesian technology "unicorn", Gojek quickly jumped into the "money-burning" race with a series of promotions for both drivers and users, claiming to have captured 35% of the market share in just 6 weeks of launching the 2-wheeled vehicle calling service. The period of fierce competition between Grab - Gojek was also the time when Mr. Tran Thanh Hai, founding member of the "unicorn" VNG, announced the birth of the Be ride-hailing application. Without expanding many services, Be only focused on the single service of calling a car. 9 months after its launch, the "yellow bee army" quickly covered all roads, appeared many times in foreign newspapers and was considered the fastest growing start-up in Asia. At the same time, Be claimed to capture about 30% of the market...

However, surveys by many prestigious organizations in the world published from 2021 - 2022 based on the number of customers using 2-wheeled vehicle calling services in Vietnam show that Grab accounts for about 50 - 60% of the market share, Gojek is in second place with about 20%, Be accounts for about 18%. For cars, Grab's market share is overwhelming with 66%, Be accounts for 22% and the rest is divided among other applications. Despite great efforts, the Vietnamese ride-hailing application market has become a game for foreign giants.

However, the "game" has completely changed when billionaire Pham Nhat Vuong's Xanh SM officially joined the race. According to Mordor Intelligence's research, after only 7 months of launching, Xanh SM has risen to 2nd place in the ride-hailing service market in Vietnam, just behind Grab, accounting for 18.17% of the market share in the third quarter of 2023. Mordor Intelligence also noted that Xanh SM owns an increasing number of vehicles and trips per day in the traditional taxi sector, compared to units with self-owned fleets. Along with Xanh SM, the "yellow bee army" Be Group has also risen to 3rd place with 9.21% market share. Accelerating together, the 2 ride-hailing applications of Vietnam have officially pushed Indonesia's technology "unicorn" Gojek down to 4th place (5.87%).

Riding on the momentum, Xanh SM recently continued to create a strong effect when launching the "Green Summer for a Green Future" program to help customers call Xanh SM cars at reasonable prices. Accordingly, the electric car calling company will apply a lower fare of up to 15% for 3 summer months (from June 1 to August 31), while still applying current incentives, helping customers travel at "discount on discount" prices. At the same time, drivers will share up to 87% of revenue when participating in the Xanh SM Platform. The "Green Summer for a Green Future" campaign with practical incentives for both customers and driver partners promises to help Xanh SM accelerate even faster on the path to conquering the leading position in the ride-hailing market share in Vietnam.

"The fastest way to convince customers is to offer ride-hailing services at more accessible prices, while providing better service standards. When customers are familiar with traveling by electric vehicles and understand the importance of green transportation, they will choose to stick with electric vehicles," said branding expert Le Thai Binh. The strong discount is Xanh SM's way of spreading a green lifestyle and encouraging society to join hands in green transformation by choosing smoke-free and pollution-free means of transportation.

As the co-founder of a technology start-up in Ho Chi Minh City, and having participated in operating Uber's system when this application first entered Vietnam, Mr. N.D.C once affirmed that if the goal is to gain a dominant market share, Vietnamese enterprises cannot compete with foreign competitors.

According to Mr. N.D.C, ride-hailing applications are not specialized technology and do not require outstanding programming skills to do so. The first problem is "where is the money". When Grab and Uber first opened the market, they had to "burn money" through promotions for both drivers and people who booked rides so that they could test and participate in the new model. Drivers need to be encouraged to mobilize a large number of people in a short time, ensuring the needs of users, so that they find it convenient. On the contrary, users also need to be attracted to book more rides, increasing the income of drivers. Uber was acquired by Grab, also because it lost in the "money-burning" race. Meanwhile, Vietnamese enterprises have limited capital, and when they spend 1 dong, they expect to make a profit immediately on that 1 dong. They cannot accept and cannot afford to lose for 3-5 years, or even 10 years to make a profit like foreign enterprises. Besides, the strategies of foreign "giants" are also much longer-term. Right from the beginning of entering Vietnam, Grab, Uber or Gojek have determined that the ride-hailing market is just a stepping stone to expand into an ecosystem of many services such as food ordering, goods delivery, payment... While Vietnamese enterprises are still struggling to gain market share, they have moved on to other services, "occupying" stores, restaurants, business households, partners... Vietnamese enterprises are slower, have fewer choices, and have to spend more money to "compete" with promotions.

"However, the game has changed. Electric cars are even more different. VinFast's cars can be self-produced, and the investment cost is much cheaper than traditional taxi companies using gasoline cars. Because of that advantage, when making electric taxis, Xanh SM will grow and gain market share very quickly, even much faster than Uber and Grab did in the past. Along with that, the stage of opening the market and creating habits for consumers is the stage where the most money is burned, and Grab, Gojek, and Be have already done that, so Xanh SM coming later will have an easier time gaining market share. On the other hand, the investment capital market has also changed. The economic situation is difficult, businesses are forced to set the goal of achieving positive cash flow to operate the machine. Even Grab and Gojek are facing a period of exhaustion, unable to pursue the promotion race anymore. In general, the time of gaining market share by price is over," Mr. N.D.C analyzed.

As Mr. C. observed, price is no longer the decisive factor when consumers choose to book a ride. Although not a regular user of technology cars, Ms. Tran Thanh Nga (living in District 11, Ho Chi Minh City) has all four ride-hailing apps of Grab, Gojek, Be and Xanh SM on her phone. Previously, Ms. Nga would occasionally book a car from each company to compare prices, but now, she mostly books cars from Xanh SM. "Even if the price is the same or a little higher, I still prioritize Xanh SM. Pure electric green cars without smoke, professional and dedicated green drivers, easy-to-use green applications, overall I'm satisfied. Every time I choose the Luxury service because it's only a few thousand dong more expensive than regular fares, but the cars are very new and the service is very good. What I like most is that the cars are smooth and environmentally friendly. Many people say it's idealistic, but in fact this is very important. Our children's generation needs to pay special attention to the environment. I don't have the means and convenience to change from a gasoline car to an electric car, but if I take public transportation, I will definitely use an electric car. Therefore, even when booking a car through Be, I still choose a green electric taxi," said Ms. Nga.

"The biggest advantage of Xanh SM, for me, is that it's quiet. Sometimes when I go to work early in the day, I see the crowded streets, the hustle and bustle of car horns, sitting on a Xanh SM 2-wheeler feels like catching a rare "silence", naturally I feel more excited. I see that since Xanh Bike came out, other companies have also improved their services, the number of times I meet drivers from other companies whose hats don't smell very good has also decreased. Not to mention that there are currently a lot of Xanh Bikes. It's almost impossible to get a car in my area during rush hour, I turn on several apps and they keep spinning around, but calling Xanh will always get a car", Ngo Quynh Mai (26 years old, living in Tan Binh District, Ho Chi Minh City) shared.

In an analysis posted on Fulcrum.sg (Singapore), Dr. Le Hong Hiep, Senior Researcher and Coordinator of the Vietnam Research Program at the Institute of Southeast Asian Studies (ISEAS-Yusof Ishak Institute, Singapore) assessed that Grab's business operations in Vietnam could be threatened by Xanh SM.

Reviewing some of Xanh SM's historical achievements, such as quickly and successfully covering services in 29/63 provinces and cities across Vietnam; deploying services in 2 cities in Laos, marking the first step to expand internationally after less than 1 year of operation... Dr. Le Hong Hiep analyzed: First, Xanh SM treats drivers as employees, not contractors or partners. As employees, drivers receive a fixed monthly salary, performance bonuses and other benefits such as 4 paid days off per month, health insurance and social insurance contributions. This not only gives drivers a sense of security but also fosters loyalty to the company. They also have to ensure their work when according to regulations, they must turn on the application 8 hours/day. That helps Xanh SM always have enough drivers and vehicles to meet travel needs, especially during rush hour, without the situation where drivers run when they like and turn off the app when they don't like like other companies.

Second, while Grab drivers have to make a significant initial investment to buy their own car before they can join the platform, Xanh SM drivers do not have to bear this cost burden because the vehicles are owned by the company. Therefore, many Grab drivers have chosen to lease or sell their cars and switch to driving for Xanh SM.

Third, in terms of operating costs, Grab drivers not only have to cover the depreciation costs of their vehicles, but also face high fuel and maintenance costs. On the other hand, the main cost for Xanh SM drivers is charging their vehicles. According to drivers, this cost can be only 1/3 of the fuel cost for traditional cars. Many drivers who have switched from other apps to Xanh SM also revealed that in addition to expensive operating costs, high commission fees - up to 25% of daily income - are the main reason why they are frustrated and switch to Xanh SM.

In addition, Xanh SM’s growing popularity is partly due to its fixed fares for rides booked through the app, as opposed to the on-demand fares of previous ride-hailing apps. With various promotions, the company’s fares can also be lower. At the same time, Xanh SM’s drivers are considered polite and friendly because the company has been well-trained and focuses on service quality. Meanwhile, the company’s vehicles are large, new, and clean, making customers’ trips comfortable and enjoyable.

Customers also appreciate Xanh SM as a green transportation solution that helps reduce air pollution, especially in Hanoi and Ho Chi Minh City.

"Thus, despite its young age, Xanh SM is showing promising potential with its rapid growth rate. If the company continues on its current trajectory, they may dethrone Grab in the Vietnamese market. This will be a great achievement for VinFast and Vingroup," Dr. Le Hong Hiep assessed.

However, Xanh SM's biggest goal is not to gain market share. Global GSM General Director Nguyen Van Thanh affirmed that Xanh SM's goal is to be "number 1 in the hearts of customers" and wishes to join hands with the whole society for a greener Vietnam.

Source: https://thanhnien.vn/goi-xe-cong-nghe-xe-dien-thay-doi-cuoc-choi-18524062922340298.htm