Will new laws stop the Uber and Grab boom?

The industry remains unsure on how new regulations will chart the future of the ride-hailing services


Nine out of 10 cars that pick up passengers at a corporate building in Mont Kiara, Kuala Lumpur (KL), are ride-hailing services. At most shopping complexes, the trends are the same.

Locals and foreigners are opting for the app-fetching car services. These self-made “taxi services” are reliable. Passengers do not haggle for the price. Expensive trips, like to the KL International Airport, are also more bearable. Even a short trip is entertained.

It was only in early 2014 that ride-sharing application (app) Uber landed in Malaysia. The South-East Asian ride-hailing platform Grab came along. Both services, now dominate the shared-economy sphere for transportation. Despite aggressive and physical intimation from traditional cabbies, these ride-hailing services have flourished and transformed the landscape of public transportation, especially in key cities.

Disgruntled users, who over the years have been complaining about the quality of public transport, have embraced the new service. Ride-sharing also had a boost as rising cost of living, less jobs opportunities and retrenchments have forced thousands to become personal drivers.

The government’s incentives for car purchasers to be ride-sharing drivers and legalisation of the services have helped cement the app-based shared economy’s position.

But four months after e-hailing services were officially recognised, the industry remains unsure on how new regulations would chart the future of the service.

In August this year, amendments to the Land Public Transport Act 2010 and Commercial Vehicles Licensing Board Act 1987 were passed in the Dewan Rakyat, allowing for e-hailing players to co-exist with traditional taxi operators in the country.

Prospective Regulations

The prospective regulations will subject ride-sharing drivers to many of the requirements that cabbies comply with, as the new laws are to include a separate driver’s permit, annual vehicle inspections, medical check-ups and insurance coverage for both passengers and third parties.

However, while leading e-hailing providers Grab and Uber are already compliant to some internal requirements including the installation of in-app “SOS” buttons, laws that governs drivers have yet to be made known.

Industry players worry that stringent laws would see an exodus of drivers.

“The requirements could create a large gap between the supply of drivers and demand for ride-sharing services,” said Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib.

“When these regulations come into effect, there will be short-term reaction and a large number of drivers will immediately leave the ride-sharing platform, especially if compliance imposes a financial burden on them,” Azrul told The Malaysian Reserve (TMR).

About 80% of the industry’s drivers are to the fact that part timers are trying to earn additional income to cope with rising cost of living. Additional costs related to the regulations could force them to seek other sources of income.

“Many drivers who are students, part timers and belong to the B40 (bottom 40%) category will be unable to afford the annual permit and insurance fees, which would be at least RM1,000,” he said.

As ride-sharing companies address the supply gap via a variety of strategies, including subsidising regulatory costs and raising fares, taxi services could emerge as a cost-competitive alternative in the industry.

“The imposition of these ride-sharing regulations and better taxi services forced on by competition will level the playing field between taxis and ride-sharing vehicles,” Azrul said.

“Taxis could make a comeback as an acceptable choice for passengers and even as an alternative to ride-sharing during high demand and pricing surge periods.”

Taxis are already adjusting to the changes in the market. Any exodus of drivers for the app-based car-hailing service would benefit cabbies.

Big Blue Taxi Facilities Sdn Bhd, one of the leading taxi players in the country with a 3,000 vehicle fleet, has already been adapting its business model to meet the current market demand.

This includes, abandoning the cabbie rental scheme, managing public perception, retaining its customer-and driver-base and improving services internally.

The Fate of Drivers

After being given a year grace period by the Land Public

Transport Commission to implement the new regulations, drivers from both e-hailing platforms will have to comply fully if they intend to go on driving.

Uber driver Aiman Ahmad Farid said, while the new regulations might be time-consuming and financially restrictive, he sees no reason to abandon the platform.

“There are pros and cons to this. For drivers who work full-time, they will need to comply. We have not been told exactly what we will need to do. But for the time being, Uber is still sorting through it,” he said.

“The longer you work, the more you earn. So, it actually has many prospects for it. I usually set a goal of how many rides I want to complete, and Uber gives me weekly increments if I meet the expectations,” he said.

A Grab driver known as Eddie, however, believed the government’s new law is meant to appease taxi drivers.

“I personally feel that once all these regulations are implemented, people will be looking for loopholes to cheat the system.”

“Even though we are unhappy, we continue to drive because we need their app services. On a daily basis, we need to make at least RM200 per day,” he said.

However, Grab Malaysia country head Sean Goh said the firm welcomed the rules as it will help elevate the standard of public transportation.

“Not only do these regulations provide an opportunity to elevate our local land public transportation infrastructure and services, but they also provide a level playing field for all industry players.

“The introduction of these regulations will certainly benefit the relevant stakeholders, especially the passengers and our driver-partners, regardless whether they are a taxi or Grab drivers,” he told TMR in an email reply.

Grab, he said, is currently working with authorities and would like to see the transition moving easily and swiftly.

Grab recently marked its one billionth ride across South-East Asia where it has a 95% market share of third-party taxi-hailing apps.

Taxi drivers are struggling, while sparring to have a slice of the cake they used to dominate entirely.

A KL-based taxi driver who has been in the business for over 10 years said investing in a privately-owned car is the only viable option for taxi drivers like himself.

“Since the introduction of e-hailing in Malaysia, my income has dropped some 60% due to the unhealthy levels of competition,” he told TMR.

“Even though I pay RM45 a day to rent my taxi, which is cheaper than what Grab and Uber offer, I can’t get the passengers to make up the difference.”

He said e-hailing firms also benefit from implementing market-driven prices, which can help these players offset the anticipated cost of regulation, whereas cabbies are bounded by metered rates.

Grab and Uber had changed the landscape of the country as to how people travel and the services expected. Now they just have to wait on how to survive in a regulated environment.