Comfort Delgro

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Off-topic...

Today took a taxi (not Comfort). I saw the taxi empty but I didn't flag it because at the top it was showing a specific location.
Decided to use Grab since got $4 promo code, through JustGrab. So this empty taxi who took my request.
When I boarded the taxi, the driver ask me - Why you never flag the taxi or book through the "standard taxi" option on Grab. So I just told him because you are showing a specific location that I am not going.

So he went on to complain something like "I rather you flag or book through the "standard taxi" option on Grab...I accept your JustGrab I lugi coz they will take 10% of the fare. I rather go somewhere and continuously pick up passengers even if the fares for each journey is $5".
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^^ Actually I think Grab or Uber is only slightly cheaper than taxi on average, even excluding the surge pricing. The difference is the $4-6 discount. This is the cash burn from Uber / Grab

Capacity utilisation of PHV is very high because now customers get $0 cost short distance trips when they used to take bus. There's substitution effect. Question is what happens when this subsidy disappears which is actually what is hurting Comfort Delgro, and then utilisation of PHV drops. The equilibrium may not be so disruptive at all but I think this PHV certainly optimises our transportation system.

Zero profit strategy is sustainable over medium term. Loss is not. There is a big difference. If I am CD I will compete with pricing at zero profit for my taxi service to ride this short term aberration out. Uber / Grab has no loyalty to the drivers and vice versa which is evident what is happening to the Uber HQ now. If CD shows they are sharing the pain I think the drivers will stabilise.


(21-09-2017, 01:05 PM)choya Wrote:
(21-09-2017, 12:07 PM)retnuoc Wrote: As Grab and Uber provide private car rental service to driver, they are moving towards asset heavy model as well.

Personally, I choose Grab and Uber purely due to cheaper fare and I always find Taxi will always be a more comfortable journey.
Based on my personal experience, I don't find Grab/Uber cheaper especially with their surge pricing.  Unless we are including booking fee for taxi rides.  Uber Pool/Grab Hitch/Grab Share is cheaper because they are car pooling.

(21-09-2017, 04:11 PM)Ben Wrote: 没有永远的朋友,也没有永远的敌人. Uber/Grab and all the conventional taxi operators were once business competitors, but now, they are becoming alliances. It is really interesting to see the development. Initially, it was the private hire cars (ie, Uber and Grab) vs the conventional taxi operators (CDG, SMRT, Trans etc). Now, with all taxi operators (except CDG) jumping into the camp of Grab, it seems the competition is between Uber VS Grab, with Grab on the winning side. So in order to fight the competition, CDG and Uber is now discussing a possible tie up. However, if indeed CDG and Uber joint forces, then the unhealthy competition will continues with each side trying to kill their opponent by continue to burn cash. No one will benefits except the customers.

IMHO, CDG should follow the footsteps of the other taxi operators and join Grab instead. In this way, Uber will have limited chance to survive and may exit the market, just like they did in China. When that happens, Grab, being the only private hire car operator, will probably stop or reduce their cash buring strategy. Then we will see a more healthy competition in the market. Fares will increase and the earning of drivers will improve.

Of course, if that happens, passengers will not enjoy the cheap rides they are getting so often now.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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Hi Specuvestor,

I beg to differ. With the introduction of Grab in my phone, my after midnight ride home from City to the Far East of Singapore has been drastically cheaper. Had it been a taxi, the midnight surcharge sets me back to the amount of $20-25. Conversely, a grab ride costs only $16-20 (before the $4 discounts). There was once when I paid $9 (after discount) for a ride from Bugis to the Far East at 2am. If i had boarded a taxi with $9, I would be alighting at Paya Lebar and be doing a "Journey to the East"

This too is applicable to taking grab during the after work hours of 7pm where due to the 25% peak surcharge for taxis, a grab fare is lower than the ordinary taxi fare even without discount. I think this is because some "after work white/blue collar workers" morph into Grab Drivers and this increases the supply of vehicles on demand

The only time when Grab is significantly higher than taxis is when our beloved MRT lines experience breakdown or delays such as this week when the EWL line experienced long waiting time which went unreported in our mainstream media.
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Hi CY09

I forgot to compare the midnight surcharge which I think many knows taxis are totally obliterated. I hardly took a midnight cab Big Grin

My comparison is mainly working hours Smile and yes I think grab is "slightly cheaper" without the subsidy... even after 7pm for short distance, which the $4-6 subsidy is a big % of the total bill.

My main point is the substitution effect on public transport which increases utilisation, when most people are still thinking it is just taxi substitution. Once they stop the subsidy which I think Uber is slowly scaling back, then the new equilibrium may not be as disruptive as we see now

And yes I think CD should move to zero profit model, lower the rental and hence end the surcharge system at least in the medium term.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
Reply
CDG imo just stock priced higher in recent past. I am not sure demise is the right word to use considering CDG has many other businesses.
They are in better footing than NOL who for some reason turnaround as soon it was sold. Does this mean the cost structure is not right or there is much better in business alignment or ... ?

.

Just my Diary
corylogics.blogspot.com/


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Grab/Uber car leasing are owning 10 years long term assets and leasing short term 1-2 years.
if PH drivers' income drops, they just hand over the car keys to Uber/Grab when the lease commitments ends in 1 or years.

No recourse. Similar to California subprime loans borrowers during GFC.

So specuvestor suggestion of zero profit for taxi division may speed up the process.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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Hi TTTI,

Sharp observation. In South East Asia, there is a mixture of Grab Sharing apps; which makes me wonder if these apps themselves are trying to lower car rentals to the lowest possible way and Comfort is stuck with taxis which it has paid at high value. Can Comfort really compete with car leasing companies of Uber/Grab at a zero profit level? Or does comfort have to go a loss making but above cashflow breakeven level.

* Cash flow break even level is not the same as P&L.
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(23-09-2017, 10:59 PM)CY09 Wrote: Hi TTTI,

Sharp observation. In South East Asia, there is a mixture of Grab Sharing apps; which makes me wonder if these apps themselves are trying to lower car rentals to the lowest possible way and Comfort is stuck with taxis which it has paid at high value. Can Comfort really compete with car leasing companies of Uber/Grab at a zero profit level? Or does comfort have to go a loss making but above cashflow breakeven level.

* Cash flow break even level is not the same as P&L.

To be conservative, one must assume that the latter scenario is certainly possible
CDG paid for expensive COEs when building their fleet a few years back, prior to Grab.
Their expensive investments will have to be depreciated/amortised over a 5yr/10yr period of time.
Compare that to Grab, which has to depreciate.... nothing. (for private hire vehicles)
I won't be surprised if this segment goes into the red, but I don't think they'd get negative CFs from this segment.
The good news is that as they take cabs off service, operating costs will also be cut rapidly.
And actually, I agree with CDG's management idling cabs rather than cutting rental rates to try to support utilisation.
The supply of services has now far exceeded the growth in demand, and it's not going to turn. Trying to fight for market share with Grab by burning cash, is a losers' game. One can win the battle, yet lose the war.
I much rather they take the pain by shrinking this segment now.
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(22-09-2017, 11:11 AM)specuvestor Wrote: ^^ Actually I think Grab or Uber is only slightly cheaper than taxi on average, even excluding the surge pricing. The difference is the $4-6 discount. This is the cash burn from Uber / Grab

Capacity utilisation of PHV is very high because now customers get $0 cost short distance trips when they used to take bus. There's substitution effect. Question is what happens when this subsidy disappears which is actually what is hurting Comfort Delgro, and then utilisation of PHV drops. The equilibrium may not be so disruptive at all but I think this PHV certainly optimises our transportation system.

Zero profit strategy is sustainable over medium term. Loss is not. There is a big difference. If I am CD I will compete with pricing at zero profit for my taxi service to ride this short term aberration out. Uber / Grab has no loyalty to the drivers and vice versa which is evident what is happening to the Uber HQ now. If CD shows they are sharing the pain I think the drivers will stabilise.


(21-09-2017, 01:05 PM)choya Wrote:
(21-09-2017, 12:07 PM)retnuoc Wrote: As Grab and Uber provide private car rental service to driver, they are moving towards asset heavy model as well.

Personally, I choose Grab and Uber purely due to cheaper fare and I always find Taxi will always be a more comfortable journey.
Based on my personal experience, I don't find Grab/Uber cheaper especially with their surge pricing.  Unless we are including booking fee for taxi rides.  Uber Pool/Grab Hitch/Grab Share is cheaper because they are car pooling.

(21-09-2017, 04:11 PM)Ben Wrote: 没有永远的朋友,也没有永远的敌人. Uber/Grab and all the conventional taxi operators were once business competitors, but now, they are becoming alliances. It is really interesting to see the development. Initially, it was the private hire cars (ie, Uber and Grab) vs the conventional taxi operators (CDG, SMRT, Trans etc). Now, with all taxi operators (except CDG) jumping into the camp of Grab, it seems the competition is between Uber VS Grab, with Grab on the winning side. So in order to fight the competition, CDG and Uber is now discussing a possible tie up. However, if indeed CDG and Uber joint forces, then the unhealthy competition will continues with each side trying to kill their opponent by continue to burn cash. No one will benefits except the customers.

IMHO, CDG should follow the footsteps of the other taxi operators and join Grab instead. In this way, Uber will have limited chance to survive and may exit the market, just like they did in China. When that happens, Grab, being the only private hire car operator, will probably stop or reduce their cash buring strategy. Then we will see a more healthy competition in the market. Fares will increase and the earning of drivers will improve.

Of course, if that happens, passengers will not enjoy the cheap rides they are getting so often now.

Can I like your post, Specuvestor...
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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.
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