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Intelligence Brief: The Ride-hailing Market Updates

Table of Contents

  1. Overview
  2. The bike-hailing growth continues
  3. Every ride-hailing player aims to be a platform/aggregator in a bid to seek further growth
  4. Loyalty remains a persistent challenge
  5. Ride-hailing companies struggle to comply with the guidelines
  6. Ride-hailing has contributed to the influx of vehicles in Dhaka street and to traffic congestion
  7. Jobike launches in Dhaka, Jobike’s last mile thesis

(1) Overview

Ride-hailing continues to be one of the most happening markets in Bangladesh. 2018 was a big year for the industry. Pathao raised a US$10 million in funding led by Go-Jek and participated by existing investors Openspace Ventures, Osiris Group and Battery Road Digital Holdings. Shohoz raised US$15 million led by Singapore-based Golden Gate Ventures and participated by Linear VC of China, 500 Startups and Singaporean-based angel investor Koh Boon Hwee. Uber has also increased its focus on bike sharing market while it continues to dominate the car market.

The competition has intensified. The growth pressure has increased on both Pathao and Shohoz. Both companies are expanding beyond transportation. It indicates both an opportunity for ride-hailing companies to explore other opportunities using transportation as the first pillar of its platform as well as an attempt to find other verticals to keep growing.

Pathao has proven that it can replicate its execution muscle into other verticals as well. Pathao Food has become a runaway success. Shohoz has launched its own food delivery business. The competition will intensify in the coming days. Rumor has it that Uber has been working on launching Ubereats in Dhaka for a while now. It plans to launch the service sometime this year.

Pathao expanded to Nepal. So far we know, it has been doing well. Shohoz has been working on plans to expand to Chittagong and Sylhet. Pathao and Shohoz both have growing logistics business. Obhai has been consistent. And so far the only company focusing solely on rides. But it can surely be predicted that they will also seek expansion beyond ride.

(2) The bike-hailing market continues to grow

Insufficient public transport and unbearable traffic congestion have made bike hailing a popular mode of moving from one place to another in Dhaka. The ride market is about 200,000 rides per day in all three cities - including Dhaka, Chittagong, and Sylhet market(1), which means about 6 million rides a month.

Supply of drivers has been a challenge for ride-hailing companies (2). It is self-explanatory. The percentage of car and bike ownership in Bangladesh explains it. However, the scenario is changing fast.

Bike sale has experienced phenomenal growth in the last two years. Motorcycle sales year-on-year increased nearly 40% in 2018 alone (3). A big reason behind this is ride-hailing companies (4). It means supply problem is likely to be a non-existent issue in the next year or so. If so happens, it will further help the industry to grow.

Ride-hailing is about BDT 20bn market, which is about 5-6% of the entire transportation industry in Bangladesh. The sector is growing at a 14-16% rate annually(5). “The urban transportation spending is about 7 billion dollars in Bangladesh. In Dhaka, it is about 4.1 billion dollars. (6).” It will grow further with the middle class rising and infrastructural development. However, the challenge for the industry would be to find growth pockets outside of Dhaka.

(3) Every ride-hailing company wants to be a platform/aggregator in a bid to seek further growth and build stronger moats

Pathao and Shohoz both have: logistics business, bike, and car sharing, and food delivery business. Pathao has a service called Pathao Tong, which is basically an ecommerce marketplace, something like Instacart except that it is not grocery specific. Pathao has been working on multiple financial products independently as well in partnership with financial institutions. It tried to launch a wallet but had to discontinue due to regulatory challenges. It is unlikely that Pathao would give up on its own wallet strategy. Pathao wants to become one app for your all needs. Payment is a central piece of that strategy.

Shohoz does not want to fall behind. It has an established ticketing business. With ride now, you call it everything transportation company. The Amazon of transportation. But it wants more. It has the ambition to get into financial services. It has been working on an on-demand trucking solution that it aims to launch early next year. It has plans to expand to more cities in Bangladesh. Shohoz does not want to be an everything transportation company, it aims to be an everything necessary company. You can get everything that you need using Shohoz app.

This is a direction that we long predicted that ride-hailing companies would pursue at FS (1).

(4) Loyalty remains a persistent challenge

Consumer loyalty has been an issue for ride-hailing companies. It is a challenge for everyone: Pathao, Shohoz, and Uber. This reality is evident in the promo-code driven nature of the market. Now discount is critical to growth in a market like ride-hailing which is a relatively new industry and where a behavioral change of the consumers is imperative for the long term growth. But it becomes a challenge when promotional offers become the single most powerful growth channel.

Ride-hailing companies agree that this is a challenge(1). They are trying to address the challenge broadly in two ways: (1) getting better at understanding consumers through data analytics. Pathao, Shohoz, Uber - everyone has been investing in data and analytics and machine learning to understand consumer behavior and deal accordingly. (2) Building better moats by creating better bundles. Expanding to other services, apart from the ride business, is also a strategy these companies are using to keep consumers around - giving consumers more than one reasons for using their app.

(5) Ride-hailing companies struggle to comply with the guidelines

From Bdnews24.com’s Ridesharing firms operate ‘illegally’ in Bangladesh:

“Not a single one of the dozen ridesharing firms is licensed to operate in Bangladesh for failing to respect the guidelines set by the government nearly a year ago. So the ride-hailing companies are running a business illegally in Dhaka even as their services get increasingly popular.
(………..)

BRTA officials say they visited the firms after getting the applications for certificate, but could not provide them with what they want because of the unfulfilled conditions. Their enlistment hinges on issues like having SOS button on apps, updating drivers’ data, call centres, and location of data server. The BRTA is now writing to the Road Transport and Highways Division briefing the government about the latest status. “Maybe the government is giving them some time because the people need these services,” BRTA Director Mahbub E Rabbani told bdnews24.com on being asked how the firms were operating without permission. He pointed that the companies were launched before the guidelines were enacted.”
(………..)

“bdews24.com tried to contact four of the most active ride-sharing firms to speak about the users’ complaints and the allegation that they were not following the guidelines. Only Uber, which operates in many other countries, sent back a statement, but Pathao, Obhai, and Shohoz.com did not respond. Uber said it wanted to follow the rules and process set by the government as a company registered in Bangladesh. It is working with the government agencies to get the enlistment certificate following the ridesharing guidelines, according to the statement.
Pathao CEO Husain M Elius did not take bdnews24.com phone calls for comments on Nov 17. Later, a person identifying himself as Md Rakib Uddin, the team leader of public relations firm Masthead PR, called and asked for sending questions related to Pathao to his company.”

The Daily Star published a follow-up report on this which is also quite fascinating.

(6) Ride-hailing has contributed to the influx of vehicles in Dhaka street and to traffic congestion

Ride-hailing has been tremendously useful to the individual users but it has, to some extent, been proven that ride-hailing can't help fix the traffic congestion in Dhaka. In fact, in many instances, it has contributed to worsening the situation by increasing the number of vehicles on the street (1). The idea that ride-hailing could help solve traffic congestion problem in Dhaka would only happen if ride-hailing is truly car-pooling, which Uber Pool has been trying in a few markets, with high occupancy vehicles where you share vehicles with other same destination users. But that’s not what happened in Dhaka. The growth has been on the bike-hailing as a high-frequency vehicle. The experience of bike sharing is not pleasant in most markets. In most cities, it has caused problems for both commuters and pedestrians. The mode is also unsafe and risky.

The discussion around the contribution of ride-hailing companies to Dhaka's traffic problem has already started. With time, this discussion will grow louder and critical. Although traffic congestion has an infrastructural aspect to it in Dhaka, ride-hailing companies have to find ways to address this issue as the service grows and becomes a part of city dwellers daily lifestyle.

(7) Jobike launches in Dhaka, Jobike’s last mile thesis

In Dhaka alone, people take 15 million rides on rickshaw alone (1). Last mile, medium to short distance transportation is increasingly becoming an area that the tech industry wants to disrupt across the world. Ofo in China. Bird, Lime and a host of others in the US. And Jobike in Bangladesh. After months of pilot operations in a few university campuses and in Cox's Bazar, Jobike has formally launched its operation in Dhaka. The startup has raised an undisclosed investment round from Fahim Saleh of Adventure Capital, prominent angel investor Tanveer Ali and former BASIS President and Founder of e-Generation Group Shameem Ahsan. With an inflated pocket, it now wants to bring a new mode of transportation.

In short, Jobike is an on-demand dockless bicycle rental service. It allows users to make short bike trips within its coverage area for a small fee. The idea is simple: instead of owning a bike, you can rent a jobike using the jobike app and start your trip. Once done, park it in one of JPS (Jobike Preferred Space) or a legally allowed public parking space and lock it. The next jobike rider will find and take it from there. Each bike comes with a GPS tracker making it easier to locate. In order to use the JoBike service, you have to download Jobike app and register. The app will show you nearby dock or bike and once you enter the payment information you will be provided with a QR code to unlock a bike and go to your destination. Co-founded by Mehdi Reza, a former product operations manager at Alibaba Group, the startup did a two-week test run in Cox’s Bazar and says that it has received great feedback.

Jobike is clearly targeting short distance rides/transportation for which people usually either take rickshaw or CNG - both according to Jobike pricing are costlier than Jobike.

There are a lot of reasons to be optimistic about bike-sharing in Dhaka. It is not only about university campuses, which Jobike targets as its initial market, but we are also always in need of transport services for short-distance which a bike-sharing service can effectively meet.

In residential areas like Bashundhara and university campuses and areas where public transport is unavailable, there is potentially a big market for bicycle sharing.

If you consider the amount of rickshaw ride you take daily or reluctantly walk to a moderately distant destination, you should see the huge potential of bike-sharing. Probably, it is not far away when you will be biking to your destination (1).

Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at [email protected]

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