Commentary

Toyota Invests In Grab, S.E. Asia's Dominant Ride-Sharing Service

Toyota has zoomed into the riding-hailing fray by installing technology, and taking a financial position, in Grab, the Singapore-based company that offers nearly three million daily rides through private cars, motorcycles, taxis and carpooling services across seven countries in Southeast Asia.

“Toyota Motor Corp. investment arm, Toyota Tsusho Corp., said it has taken an undisclosed stake in Grab through its Next Technology Fund, a $55 billion division it established earlier this year to identify next-generation automobile-related businesses opportunities. The Toyota investment follows a $2 billion investment from Japan's SoftBank and China's Didi Chuxing in July that valued GrabTaxi Holdings Pte Ltd. at just over $6 billion,” reports Martin Baccardax for TheStreet.

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This first investment made by the Next Technology Fund “goes beyond financing,” writes David Meyer for Fortune. “In a separate statement, Grab said it would give Toyota access to data on the driving patterns of 100 Toyota cars in the Grab fleet, as captured by the car manufacturer's own Translog data recorder.

“Toyota launched Translog last year with corporate customers in mind — if fleet operators install the units in their cars in order to monitor their drivers’ activities, they can get insurance reductions,” Meyer continues.

“It should be noted that the investment is from Toyota Tsusho, the Toyota Group’s trading arm, while the data partnership is with Toyota Motor,” points out Jon Russell for TechCrunch.

Grab operates in Singapore, Malaysia, Indonesia, Thailand, Philippines, Vietnam and Myanmar. It claims 1.2 million drivers and a market share of 95% in third-party taxi-hailing and 72% in private-vehicle hailing in Southeast Asia, according to the Toyota Tsusho release announcing the investment.

“But its share could be under threat as San Francisco-based Uber, the world’s largest ride-hailing service, is expected to increase its focus on the region after it folded its China business into Didi last year,” Reuters’ Naomi Tajitsu and Anshuman Daga point out.

“Uber is also in seven countries in the region but it doesn’t disclose information about its business there. One other major rival is billion-dollar startup Go-Jek, which is present in Indonesia and moving close to a $1.2 billion round of its own,” writes TechCrunch’s Russell.

“Automobile manufacturers are working with and competing against technology companies to figure out how to make money from services to drivers as automation, electrification and on-demand transportation threaten to reshape the current model of individual car ownership. Honda Motor Co. has also invested in Grab, its first in a ride-sharing company, in a partnership aimed at expanding motorcycle-hailing operations in Southeast Asia,” writes Kevin Buckland for Bloomberg Technology.

In addition, “General Motors Co. has joined forces with both Uber and Lyft, while Volvo Cars partnered with the former and Tata Motors Ltd.’s Jaguar Land Rover with the latter. Volkswagen AG has created a mobility services division under the Moia brand and invested $300 million in ride-hailing provider Gett Inc.,” Buckland reports.

“Should the rise of ride-sharing shift the auto market away from private ownership, these investments that carmakers are putting into the tech companies such as Grab and Uber will act as a hedge,” Danny Tan observes for Paul Tan’s Automotive News.

But don’t go shorting that stock you have in auto insurance companies quite yet. 

In an analysis of the impact of ride-sharing on the automotive industry, Tony Hughes, managing director, economic research for Moody’s Analytics, writes that “rather than declining sales volumes, as many pessimists have predicted, the biggest threat seems instead to be increased vehicle homogenization.”

That’s not to say that ride sharing won’t continue to grow.

“Some people (myself included) enjoy driving and will continue to demand old-style cars even after self-driving technology is perfected. Even the keenest driver will, however, appreciate a cheap ride-share after having a few too many glasses of wine or when avoiding paying for parking at the airport. Cars with manual gearboxes and steering wheels will be privately owned even in the steady state. The utility of ride-shares using autonomous vehicles, however, should be obvious and will undoubtedly capture a slice of the transportation market during the next decade,” he posits.

Similarly, after assessing a couple of other studies in a post for Automotive Drift, Trevor English writes: “Owning a car will hardly become taboo in the next 15 to 20 years. It is still a large part of the global economy, and changing an aspect so central to global growth takes time. Studies predict that carsharing and ridesharing services’ market share will continue to grow, but not to a point that will heavily disrupt the innovating automotive industry.”

Nor will they eliminate, it appears, those part-time drivers-ed gigs that have put many a high school physics teacher's kids through college.

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