Why regulators said yes to Grab’s Singapore taxi play

In a surprise announcement on Wednesday, Singapore’s Land Transport Authority (LTA) said it had issued a street-hail service operator licence (SSOL) to GrabCab, a subsidiary of Nasdaq-listed Grab Holdings.

The license – valid for 10 years starting April 9 – allows a company to operate taxis, which can serve both street-hail and ride-hail trips.

Regulators said that Grab’s entry into the country’s taxi sector was approved because it intends to start a new taxi fleet rather than acquire an existing one.

A GrabCar parks outside the JW Marriott Hotel in Singapore./ Photo credit: JCREATION/Shutterstock

Industry observers said the move would increase competition in the sector, possibly benefiting commuters and drivers. Some warned that this doesn’t erase the potential for anti-competitive behavior.

With the new license, Grab has become the sixth taxi company in Singapore, after Trans-cab Services, Prime Taxi, Strides Premier, and ComfortDelGro subsidiaries CityCab and Comfort Transportation.

Grab will be given a three-year grace period to expand its fleet to at least 800 taxis, which is the minimum fleet size for a street-hail operator. A Grab spokesperson said the company will introduce a taxi fleet featuring hybrid and electric vehicles in “the coming months.”

No surprise

Grab’s entry comes after its proposed takeover of taxi operator Trans-cab fell through last year. The Competition and Consumer Commission of Singapore (CCCS) cited competition concerns in its review of the merger.

For the issuance of the new license, regulators in Singapore considered the input of CCCS and assessed that a new entry would require Grab to grow its fleet and market share organically.

The company would need to start a new taxi fleet, which could result in a net increase in the supply of street-hail services if GrabCab can attract new taxi drivers.

See also: Does combining Grab with asset-heavy Trans-cab make sense?

Such a move is consistent with CCCS’ general view that businesses are not prohibited from entering new or adjacent markets through organic growth, or striving to protect their market position through competitive merit, the regulators said.

Industry observers noted that Grab’s entry into the taxi space was no surprise – the barriers to entry are low and there’s potential for profitability despite a shrinking market.

Victor Kwan, senior lecturer at the Singapore University of Social Sciences, said the move also makes sense, as recent regulatory shifts have made it easier to build a taxi fleet.

Lingering concerns