The Ministry of Transportation has urged ride-sharing companies, also known as online taxis, to comply with regulatory requirements to ensure fair competition with conventional taxi operators. (Antara Photo/ Zabur Karuru)

Go-Jek Burns Cash on Hefty Subsidies, While Grab Gains Traction


JULY 18, 2016

Jakarta. Indonesia's insufficient public transport system, which is notorious for traffic congestion, unreliable bus schedules, inflexible routes, overcrowding and poor safety, has led many customers, especially in big cities such as Jakarta, to turn to the humble motorcycle taxi, or ojek, which can be hailed via applications on their smartphones.

Despite the fact that there are many providers for on-demand motorcycle taxi services via smartphone apps, including Blu-Jek, Lady-Jek, and JegerTaksi, the biggest players today are still Go-Jek – a startup founded by Harvard Business School graduate Nadiem Makarim in 2010 and Grab, a ride-hailing app that evolved into multi-platform service, founded by Nadiem's Harvard friend Anthony Tan in 2012.

Both Go-Jek and Grab initially adopted the taxi-hailing service model pioneered by San Francisco-based Uber Technologies, but later revolutionized their services to cater to local conditions and needs, other than only transportation.

Despite having had an offline presence since 2010, Go-Jek officially launched its app in early 2015, while Grab brought GrabBike, the motorcycle taxi ride-hailing service, to Indonesia in May 2015. The two companies competed fiercely ever since to draw customers as well as partner drivers.

Burning Cash

While analysts say the market for both startups remains wide open in Indonesia, leaked data obtained by the Jakarta Globe shows in stunning detail how Go-Jek is actually suffering from stagnating growth and high cash burns due to subsidy-driven schemes to draw users.

According to the data, Go-Jek has spent $73 million on subsidies in the six months between October 2015 and March 2016, but this only yielded 12 percent growth in completed orders over the same period.

The data suggests that Go-Jek has been unable to grow without subsidies as its rides growth slowed in this period, corresponding with a reduction in subsidies.

Go-Jek's businesses has boomed since last year, when it started to offer promotional rate of Rp 10,000 (76 US cents) for the first 25 kilometers, instead of its regular Rp 4,000 per kilometer, leading people to share it extensively on social media.

Go-Jek public relations manager Rindu Ragilia has not replied to an inquiry about the subsidy as well as the growth in the number of rides when the Jakarta Globe tried to reach her via e-mail and phone.

As Go-Jek partners, drivers are still assured of their jobs, but some have started to feel the pinch without the subsidies.

"I could make Rp 8 million [per month] when the tariff was Rp 4,000 per kilometer. But it was about seven months ago. Nowadays, it [my income] has fallen drastically," full-time Go-Jek driver Wiki Febriantos, 30, told the Jakarta Globe. He has been with the company for 11 months.

Wiki said nowadays, if he qualifies for bonuses from Go-Jek, he can make between Rp 4 million and Rp 5 million per month, but if he fails to meet qualify for bonuses, he barely earns Rp 3 million.

This figure, he said, is gross income before deducting for fuels, maintenance and smartphone data packages.

After several adjustments, Go-Jek currently charges Rp 1,500 per kilometer during off-peak periods in the Greater-Jakarta area, with a minimum payment of Rp 12,000 and Rp 2,000 per kilometer during peak hours at a minimum of Rp 15,000 per trip.

Peak hours are from 6 a.m. to 9 a.m. and 3 p.m. to 8 p.m. from Monday to Friday.


Meanwhile, Grab appears to gain strength in Indonesia. The startup claims that its GrabBike service, which provides motorcycle taxis hailed via smartphones, exceeded 50 percent of the motorcycle taxi market share in the country as of March this year. It was three quarters ahead of the initial target of end-2016.

Ride-hailing service Grab revealed on July 14 that Indonesia is its largest market, based on the number of trips completed. (Antara Photo/Zabur Karuru)

The company also announced that GrabBike is been growing at 300 percent this year to date, despite the startup having removed many of the subsidies.

It currently charges Rp 1,500 per kilometer in non-peak hours with a minimum payment of Rp 5,000. During peak hours, Grab charges an additional Rp 5,000 per ride.  Peak hours span from 6 a.m. to 9 a.m. and 4 p.m. to 8 p.m. from Monday to Friday.

GrabBike charges a higher fare for rides longer than 12 kilometers.

For example, a customer who wants to travel 14 kilometers using GrabBike will pay the normal tariff for the first 12 kilometers and an additional Rp 2,500 per kilometer for the remaining distance.

If the trip is made during peak hours, the customer must also pay an additional Rp 5,000 on top of that.

GrabBike driver Charlie, 35, said he could bring home up to Rp 6 million per month on average, including the bonuses that Grab pays for certain work achievements.

"It's more than what I earned when I worked with an expedition company," he said.

Grab also announced that Indonesia, Southeast Asia's largest economy, has become its largest market by completed rides across all platforms.

The company, which provides motorcycle, private car and taxi-hailing services, operates primarily in the Greater-Jakarta area, home to more than 30 million people.

Grow First, Sustain Later

When asked about the rivalry between the two biggest motorcycle ride-hailing services, Indonesia E-Commerce Association (idEA) chairman Daniel Tumiwa said both players have a chance to survive in the business.

"They will still grow because their services fill Indonesia's needs. Their services support middle-income [activities]," he said.

Daniel said in any startup business, there is a growth stage, at which point it is justified if the company does not make profit.

"Only growth is relevant. Sustainability will come later," Daniel said.