Grab: becoming a taxi company a step back from Industry 4.0
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Ride-hailing firm Grab says giving in to traditional taxi companies’ demands is akin to bowing before “angry workers threatening to smash machinery.” Grab has written to Prime Minister Nguyen Xuan Phuc expressing concern over the latest draft of a decree prepared by the Ministry of Transport under which transport firms offering services with under 9-seater cars should be registered as taxi firms before they can apply ride-hailing technologies.
This means that Grab and other ride-hailing firms would have to register their services again as taxi businesses and comply with corresponding legal responsibilities regarding their operating licenses, drivers’ profiles and tax duties.
“The regulation not only goes against the policy and guidelines of the Government on the application of science and technology, and on reform of administrative procedures, but also completely denies the clear benefits achieved by the pilot scheme for ride-hailing services,” the company said.
It said that the pilot scheme has sped up development of the transportation market, helped state agencies find effective management solutions using technology, and inspired the advance of Industry 4.0 in Vietnam.
The company is providing an essential service to 20 percent of Vietnam’s population every day, providing work for 175,000 drivers and has contributed VND270 billion ($11.5 million) to the state exchequer in taxes in the first 9 months of this year.
It said many taxi companies have “awakened” to the revolution and are currently cooperating very well with it, as well as other ride-haling firms.
However, there remain “traditional taxi businesses who fear innovation, losing market dominance, and competition,” the company said.
Bad precedent
“traditional taxi businesses who fear innovation, losing market dominance, and competition,”
Grab said that this (treating ride-hailing firms as taxi firms) would set a bad precedent for the whole legal system and send discouraging signals to the start-up environment in Vietnam.
“We have to emphasize that the approval of this draft, to appease the subjective will of some traditional taxi companies, would be to oppose the benefits and advances so important to society and the economy. This will be a step backwards from Industry 4.0, to bow before ‘angry workers threatening to smash machinery,” wrote Lim Yen Hock, CEO of Grab Co. Ltd.
On Wednesday, a standing working group of the Government announced the results of the review of the draft submitted by the Ministry of Transport, saying that based on road traffic law, transport vehicles using ride-hailing technology like Grab or Uber are in essence taxis.
These vehicles have to be subject to regulations as taxis, and cannot be classified as ‘electronic contract-based vehicles’ to circumvent the law, evade tax, avoid costs and receive incentives that do not apply to traditional taxis, the working group said.
The debate over Grab’s status as transportation company is not new in Vietnam.
Vietnam’s top taxi company Vinasun has sued Grab for $1.84 million in losses, citing “unhealthy competition.”
The ride-hailing market in Vietnam has seen new entrants after the departure of Uber, which sold its Southeast Asia operations to Grab. The newcomers include Fastgo and GoViet, the last mentioned being an affiliate of Indonesia’s Gojek.
Current market dominator Grab has expanded its services to include GrabFood, a food delivery service, and GrabCar Business, targeting the corporate sector.
These moves pose further challenges for long-standing taxi firms like Mai Linh, Taxi Group and Vinasun.
Questions & Answers
Q.What is Grab's primary concern regarding the Ministry of Transport's latest draft decree?
What is Grab's primary concern regarding the Ministry of Transport's latest draft decree?
Grab is concerned that the draft decree would force ride-hailing firms to register as traditional taxi companies. This would mean complying with extensive legal responsibilities for operating licenses, driver profiles, and tax duties, effectively undoing their current model.
Q.How does the Vietnamese government's working group view ride-hailing services like Grab?
How does the Vietnamese government's working group view ride-hailing services like Grab?
A government working group states that vehicles using ride-hailing technology are essentially taxis, based on road traffic law. They believe these services should be regulated as taxis and not be classified as 'electronic contract-based vehicles' to avoid existing laws and costs.
Q.What evidence does Grab provide to show its positive impact in Vietnam?
What evidence does Grab provide to show its positive impact in Vietnam?
Grab states it serves 20% of Vietnam's population daily and provides work for 175,000 drivers. It also contributed VND270 billion ($11.5 million) in taxes to the state exchequer in the first nine months of the year.
Q.Which other companies are now operating in the Vietnamese ride-hailing market?
Which other companies are now operating in the Vietnamese ride-hailing market?
Following Uber's departure, new entrants to the Vietnamese ride-hailing market include Fastgo and GoViet. GoViet is noted as being an affiliate of Indonesia's Gojek, increasing competition for Grab.
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