Grab plans to spend $700m on a rental car fleet

Photo credit: think4photop / 123RF Stock Photo.

Grab is taking on US$700 million in debt to expand its car rental program, the Singapore-headquartered firm announced today.

Uber’s competitor in Southeast Asia, already claiming to be the leading on-demand transportation platform in the region, now targets to also be the region’s “biggest rental car fleet” by this time next year.

Grab argues making rental cars available will help it grow its network of drivers in countries where car ownership is relatively low. If you don’t own a car, you can rent one at favorable terms and then join Grab’s network. The premise is that you make enough money through driving to recover the costs.

What exactly is Grab allocating the US$700 million to? Which local rental firm is it partnering with in Indonesia? Does it plan to acquire cars to grow its rental fleet? Grab’s spokesperson declined to answer these questions.

In Singapore, Grab partners with SMRT, one of the city-state’s privatized public transportation companies. The partnership will make SMRT’s vehicle fleet available to aspiring Grab drivers.

Indonesia is Grab’s biggest market and it also sees a potential for its rental scheme there, according to the release.

Grab already runs a rental program in Indonesia with a third-party firm called TPI Rental, so it could expand on this relationship, or establish similar new ones.

Preferential treatment for renters?

Another question Grab left unanswered is how it ensures drivers can earn back rental fees.

“Grab has a number of ways to help driver partners be more productive on the road and earn more revenue. The driver app has a feature called “back2back jobs”, which allows drivers to accept their next job during their existing trip, which reduces idle time between bookings. There’s also an in-app Driver Heatmap which guides drivers to areas of high passenger demand, which increases their chances of getting a ride booking,” the spokesperson told Tech in Asia, but that applies to owners as well as renters.

TPI Rental’s website says you can rent a car for US$14.80 per day, and that you get “priority orders” from Grab.

This could turn problematic if drivers who bring their own car into the network feel like the number of orders they are getting is affected.

Grab’s spokesperson declined to comment whether there will be preferential treatment for drivers under the rental scheme.

Converted from Indonesian Rupiah. Rate: US$1 = IDR 13,517.