It’s a street battle with plenty of fumes. Taxi drivers versus ride hailing apps — a drama that’s played out in major cities around the world. But in Jakarta, Indonesia, traditional taxi drivers just scored a win: New regulations set to take effect April 1 will make it harder for Uber, Grab and Go-Jek to compete.
Indonesia’s biggest taxi company, Blue Bird, couldn’t be happier.
“At the end of the day most of these regulations are about leveling the playing field,” Blue Bird Group CFO Daniel Phua told CNBC. “It’s making sure that the same regulation applies to all parties. So as you know, there are a lot of the new players. Because technology is moving so fast, regulations have to catch up.”
The new regulations say municipalities can set a price cap on fares charged by ride-hailing app companies and also limit the number of vehicles operating in a district. In addition, drivers must possess a vocational license for public transportation.
Grab Indonesia, the domestic arm of Southeast Asian ride-hailing company Grab, calls the new rules protectionist.
“The government’s proposed intervention on pricing will mean passengers end up paying more for a ride than they need to. We believe that a fully flexible pricing approach that responds to the needs of the market is the most efficient approach to price-setting,” wrote Ridzki Kramadibrata, managing director of Grab Indonesia in a statement on Friday.
“Second, setting vehicle quotas encourages monopolistic positions, restricts the number of people that can benefit from our services. Third, the proposed change that requires our drivers to transfer STNK (vehicle registration certificate) to a business cooperative takes away our drivers’ potential to own their cars eventually.”
The transportation sharing economy is a highly competitive business in Indonesia, Southeast Asia’s most populous country. It’s not easy getting a population of 250 million people around cities, towns and villages.
When ride-hailing disruptors entered the scene a few years ago, traditional taxis felt the pain then and today. Blue Bird has seen revenue and net income plummet. In the first 9 months of 2016, Blue Bird’s net revenue dropped 9.7 percent and net profit plummeted 42.3 percent.
The disruptors are plowing forward with cash and partnerships. In February, Grab announced a $700 million investment into its Indonesian operations over the next four years. It will open an R&D center and hire 150 engineers. In December, Uber partnered with PT Express, Indonesia’s second largest taxi operator.
Blue Bird has also teamed up with Go-Jek, the local ride-hailing motorbike app company. Go-Jek has expanded beyond motorbikes and started a car service similar to Uber and Grab.
“Motorbikes are currently not regulated,” says Blue Bird’s Phua. “The 4 wheelers are the parties being regulated at the moment. So the regulations basically require the vehicles to go through safety checks, for the drivers to have a vocational license, for them to have commercial license, to pay proper VAT. So basically all the regulations that are in place for taxis, will now be applied for the new players.”