Will Gojek exit Singapore? Reducing its cut from drivers could be a prelude

Gojek drivers may have cheered the recent cut in commission rates to be paid to the Indonesian ride-hailing platform operator. But the way some market watchers see it, the news may be a harbinger of something bleaker – that Gojek could be eyeing an eventual exit from Singapore.

Gojek last week said that it will lower the driver commission rate to 10% per trip – from 15% previously – from November 2023 until at least the end of 2024. This was touted as a way to help drivers defray rising costs, and lure more drivers onto its platform.

According to DBS Group Research, however, the cut in driver commission rates will “intensify losses” for Gojek and parent company GoTo.

Photo credit: GoTo

The business case for Gojek to operate in Singapore remains “weak,” the research house said. It added that the rate cut reinforces its view that Gojek will leave Singapore in the medium to long term.

However, DBS edited its report on Oct 25 to remove this view, although the analyst Andy Sim said the message in the report on tough competition remains “unchanged.”

Indonesia-listed GoTo no doubt faces pressure from investors to turn profitable. And the cut in commissions will be a setback to its efforts on this front.

For the second quarter ended June 2023, GoTo narrowed its losses to 3.3 trillion rupiah (US$207 million) from 7.6 trillion rupiah (US$477 million) in Q2 FY 2022.

On the ride-hailing front, its adjusted EBITDA improved to negative 164 billion rupiah, from negative 1.4 trillion rupiah the year before.

The rate cuts and the cost of maintaining ride-hailing services in Singapore won’t improve these figures in the fourth quarter. That said, the negative impact will be small.

Indonesia rakes in the bulk of revenue for GoTo. For the first half of 2023, the country accounted for 6.7 trillion rupiah (US$421 million) of the company’s revenue, compared with a combined 160.3 billion rupiah (US$10 million) from all its other markets.

Shopping for options

Nonetheless, GoTo may turn its resources and attention back to its home market of Indonesia in light of recent developments.

A move by the Indonesian government to separate sales activities from social media apps has given a boost to players such as GoTo’s ecommerce business Tokopedia.

Prior to the new law, Tokopedia had been trying to convince not only users but also merchants to continue using its platform.

Banking on Indonesia growth