Comfort Delgro

[weijian]

I think most of us here are suffering from the "law of small numbers" bias. Are we attempting to extrapolate our own experiences (i took a Uber and this is how much it costs) or small sample sizes (my brother in law or I earn XXX) into the reality of the larger world?

Generally, I see that we are able to agree that ride hailing companies' prices (without subsidies/discounts) are actually not significantly lower than the traditional taxi companies under normal circumstances. In Singapore's context, abnormal circumstances include (1) hailing a cab at places/times that authorities deem as requiring incentives (Airport, midnight, CBD), (2) traffic jams, (3) bad weather. Authorities/Taxi companies used to add barriers (pay more) or from the POV of the driver, incentives as a solution to these "abnormal circumstances" that brings down the service standards to the consumer. It seems like the actual solution is simply add capacity by either pouring in money to buy new CAPEX for cars (equivalent to new entrants into the market) or lower down the entry barriers for drivers (private hire drivers have less stringent requirements to start earning money compared to "full fledged" taxi drivers)

I think price alone, is not the sole determinant to the attractiveness of ride hailing companies like Uber/Grab - GPS tracking (knowing when your cab is coming), able to hail a cab anywhere/anytime with a smart phone (no more standing besides the road or paying the booking fee!) and knowing the service standards/who is the driver - also form part of the full package of why ride hailing is disruptive in nature (provide better service standards than the incumbent)

[weijian]

So far, I have not seen CDG launching an offensive move on the inspection schedule for PHV which will further increase the cost of the PHV operating cost and at the same time, increase the revenue for their inspection business.

There are no inspection for PHV for the first 3 years unlike the taxis, which have a inspection schedule every 6 months.

There are around 40000 PHVs on the road which may translate to S$4-5 million of annual revenue.
These PHVs have relatively high mileage which, retrospectively speaking, need a more frequent inspection.

In this kind of cutthroat battle, every cent counts.

Another possibility is an increase in vehicle inspection fee. From sgyounginvestor's blog, the last increase was in 2006. It seems timely for the next increase.

Agree and good points. It's reasonable to request regulators to level the playing field. The licensing of PHV is already the first step

Good points raised by VBs.

In this battle between CDG vs Grab/Uber in Singapore, the "first level thinking" question may be something like "What is the appropriate margin of safety that i can buy CDG which has experienced a share price reduction due to the competition". But this encompasses the possibility of catching failing knife as the (private equity) liquidity has not dried up yet. Recent popular examples like Starhub/M1 and the OnG counters come into mind.

Would a "2nd level thinking" question be something like "CDG is definitely going to respond. So whom will probably be the direct beneficiaries of CDG's response?"

[YMPL]

I read valuable views from our VB here. I reckon, one common view is once Grab/Uber stop "cash-burning", the competitive landscape will change.

The cost structure of taxi, and private-hire shouldn't be too far a different, since the biz model is more and less the same. The differentiation is to do it more efficient (or cost effective) e.g. better utilisation of assets

Driver and consumer interests are a contradicting for disruptors. Once driverless tech materialised, the driver cost will be out, or much less. Disruptors will have a upper hand, since driverless need to integrate to the disruptive tech, which is weaker among incumbents. Furthermore, disruptors have accumulated data, which is very valuable. The "cash burning" is not totally worthless.

How far is driverless from now? I am observing, and it seems it is not too far away from now. Probably we can see it around 5 years from now, not a very long time for value investors. The following is the latest news I would like to share to our VB.

https://www.recode.net/2017/9/27/1637406...artnership

I guess, we will more likely to see driverless earlier than disruptors stop their "cash-burning".

What your view?

[weijian]

I read valuable views from our VB here. I reckon, one common view is once Grab/Uber stop "cash-burning", the competitive landscape will change.

The cost structure of taxi, and private-hire shouldn't be too far a different, since the biz model is more and less the same. The differentiation is to do it more efficient (or cost effective) e.g. better utilisation of assets

Driver and consumer interests are a contradicting for disruptors. Once driverless tech materialised, the driver cost will be out, or much less. Disruptors will have a upper hand, since driverless need to integrate to the disruptive tech, which is weaker among incumbents. Furthermore, disruptors have accumulated data, which is very valuable. The "cash burning" is not totally worthless.

How far is driverless from now? I am observing, and it seems it is not too far away from now. Probably we can see it around 5 years from now, not a very long time for value investors. The following is the latest news I would like to share to our VB.

https://www.recode.net/2017/9/27/1637406...artnership

I guess, we will more likely to see driverless earlier than disruptors stop their "cash-burning".

What your view?

A few thoughts.

- Cost structure of Taxi Vs Private-Hire  - (1) Taxis uses diesel, which is much cheaper and more efficient in terms of mileage/liter. It has higher taxes but if used more abundantly, the depreciation is spread over a longer mile-age as well. (2) The whole allure of private hire, if we are strictly talking about pure ride-hailing portion, is that the CAPEX is bore by the" employee", rather than the "employer". That saves alot for the employer although we see that a hybrid model (ride hail software + own cars as well) may be the final model (3) There is little incentive to be more cost efficient because all ride hailing companies' focus now is still to be the established market leader first, in the near future.
http://www.hardwarezone.com.sg/feature-w...ol-engines

- I think it is a given that with competition, capitalism expands and extends its good side tremendously. I suspect driver less tech is not very far away, especially when even INTEL, a semiconductor giant has also been spending its money and engineering resources on it. Nonetheless, i am not an insider of this technology and so i don't wanna shame myself trying to predict a timeline. But one thing is for sure - I wouldn't be 1 of the first to volunteer to sit in one when the technology arrives! (better let others try first to to clock up the 10mil accident-free hour statistic before i even think of trying)
https://techcrunch.com/2017/03/13/report...ving-tech/

- Softbank will most probably conclude at least 1bil new equity injection into Uber soon. Money burn continues....
https://www.bloomberg.com/news/articles/...ck-s-power

[YMPL]

Outsource does not mean the cost has gone, but converted to either sub-con fee or profit-sharing. Capex is there for both taxi and "pure ride-hailing" model. It is either paid by taxi operators or "supplier (taxi driver)", and will be compensated somewhere and somehow. Incumbents have their advantages on capex and maintenance, while disruptors are more capable to maximise the asset utilisation. If disruptors are having absolute winning formula over incumbents, we will not see the partnerships of Grab/Others and CD/Uber.

The cost structure is the same, but varies to each operator, due to its efficiency, IMO.

I agree driverless taxi will take time to mature. Lower fare will be a good catalyst. Driverless taxi fare should cost at most 2/3 of the current fare, and I believe it will go much lower over higher utilisation. Let's see.

[Life is a game]

The insurance around driverless is a major pain. It's not going to fly anytime soon.

Sent from my SM-N9005 using Tapatalk

[Big Toe]

While the technology for driverless tech maybe maturing fast, the legislation will take time, a long time.
If the driver-less car beats a red light, who's at fault? The owner or the car maker? If it gets into an accident after beating the red light, is the insurance company that is covering the car going to bear liability? Is the insurance company going to cover it in the first place? Insurance premiums considers the precedent rate of accidents and cost but there is nothing to refer to in this case.

What is likely going to happen, my best guess, is driverless buses will happen before driverless cars. A defined route with less variables will be easier to tackle. Bus companies can take up the liabilities associated with the risk of this new technology if they are large enough.

[specuvestor]

^^ actually the biggest problem is who is responsible for casualty: driver, passenger or pedestrian. Does the AI optimises the survivability of the driver. passenger or pedestrian eg driving into a ravine vs swerving into a group of children.

[YMPL]

While the technology for driverless tech maybe maturing fast, the legislation will take time, a long time.
If the driver-less car beats a red light, who's at fault? The owner or the car maker? If it gets into an accident after beating the red light, is the insurance company that is covering the car going to bear liability? Is the insurance company going to cover it in the first place? Insurance premiums considers the precedent rate of accidents and cost but there is nothing to refer to in this case.

What is likely going to happen, my best guess, is driverless buses will happen before driverless cars.  A defined route with less variables will be easier to tackle. Bus companies can take up the liabilities associated with the risk of this new technology if they are large enough.

The work for legislation has started in US. It will take time of course, but not decades away I guess.

http://thehill.com/policy/transportation...egislation

[CY09]

http://www.channelnewsasia.com/news/busi...up-9274568

Grab is taking another stab at the lucrative Airport taxi route.

It bypasses the $3 - $10 (if the pax is going to MBS or RWS) area surcharge which many taxi drivers enjoy when picking up tourists from Changi Airport. In fact, if I were Grab i would price that out of the $10 passengers should save, I would take a 50% cut (give them a $5 discount over taxi fares only)

And with Grab being a familiar app to other South East Asians, I wonder if local taxi companies are going to band together. We may see a downward revision of Singapore's taxi fare structure in terms of surcharge of picking up at some areas; as this will mean a decrease in revenue for cabbies, I expect further rental cuts by taxi companies.

Singapore Taxi Fare structure: https://www.lta.gov.sg/content/ltaweb/en...thods.html