This article first appeared in The Edge Malaysia Weekly on June 17, 2019 - June 23, 2019

TWO events that may be considered revolutionary in the recent history of Malaysia’s transport sector were the establishment of low-cost carriers, starting with the AirAsia Group back in 2002, and the introduction of digital ride-hailing services a decade later.

Starting off as a digital taxi-hailing service, Grab disrupted the urban taxi industry. Not only did consumers enjoy the cheaper fares and more reliable service it offered, but many also took up driving for it full-time or part-time.

Stories about how full-time Grab driver-partners could earn a respectable monthly income driving passengers around in their personal cars enticed almost 200,000 people to get behind the wheels.

But come July, the disruptor is being disrupted because of government regulations that would make the drivers public service vehicle (PSV) licensed operators. It seems many Grab drivers are still undecided as to whether they want to continue driving for the ride-hailing operator.

For Grab Malaysia country head Sean Goh, the regulation process, which adds to the drivers’ fixed costs apart from time spent getting licensed, will discourage many from driving for ride-hailing service providers going forward.

And this, he says, will hamper Grab’s objective of helping to develop Malaysia’s digital economy, which creates income for the masses by leveraging technology. Last year alone, Grab drivers generated as much as RM2 billion in income nationwide, he adds.

If there is a huge income-generating potential, why wouldn’t people want to go through the licensing process? A one-time upfront fee and subsequent annual registration cost are relatively small compared with the prospects of a reasonably attractive income.

“There are two real barriers as to why people would not want to go through regulation. The first is the cost. There is a certain cost, and if we play this out completely without any support, without any negotiation, it is about RM800 upfront.

“A lot of drivers don’t have that kind of money sitting around even though they know they can earn after they go through [the process]... they don’t have a choice. We’ve done a survey ... it is quite a barrier for some of our drivers,” Goh tells The Edge.

Many are not aware of the actual cost to a driver to get a PSV licence. While it only costs RM20, a potential driver will have to go through a medical checkup, training, examinations and vehicle inspections, which add up to about RM310.

On top of that, they have to get an insurance policy with a premium of about RM400. This policy will cover a whole year, regardless of whether the driver is working full-time or part-time for Grab.

There is also an annual tax of RM110 that the driver has to pay.

Realising that there could be a substantial drop in drivers providing services if many decide not to proceed with the licensing regulations, Grab is committed to reduce the monetary and time friction to get licensed, says Goh.

“Recently, we launched a programme called Pakej Pikul Bersama. We are saying to all the drivers that are rushing to make it through July that we will give them essentially a 100% subsidy,” he says.

That is not all as the programme aims to reduce the time spent on getting licensed. Grab will introduce online theoretical training classes and conduct mass theoretical examinations, says Goh.

Without these commitments, many drivers, especially part-timers, will find it a hassle getting licensed if, at the end of the day, they are just going to be “online” three to four hours a day.

Not every ride-hailing driver knows for sure how many hours he or she will be putting in every day because it is something to try out before deciding whether one wants to do it every day or that it is just not your thing.

“The regulations have the effect of deterring people from even trying to do more, trying to earn more, in the first place. On top of that, for those who are not very sure they are going to continue, this might be the final straw,” says Goh, explaining why Grab is taking measures to help the drivers.

While Grab is anticipating a drop in the number of available drivers once the regulations kick in, Goh says that those who are savvy enough to look at the potential of staying with the ride-hailing service will treat the upfront cost and time as an investment.

This is because after the regulations take effect, coupled with a drop in the number of drivers, peak hours will increase as the same number of people are served by fewer drivers.

Grab currently offers a time booster incentive, which is a guaranteed pay of 60 sen per minute during mega peak hours, 55 sen per minute for ultra peak hours and 45 sen per minute for peak hours for GrabCar and JustGrab services.

For all these periods, Grab will still charge 25% commission on the fares if drivers are not on auto accept, and 20% commission if they are. This means that even when the fares are higher, it is not necessarily true that Grab will earn more.

The problem is that there is no guarantee drivers will earn more post-regulation, which is why many have adopted a wait-and-see stance.

If most drivers take this view, this will hurt Grab as it will lead to bad customer experience because it will take longer for a driver to be assigned to passengers. At the same time, Grab will have to fork out money to incentivise the existing drivers.

“Needless to say, if everybody waits and sees, it will be very damaging for Grab as a business. That is clear. But also, it will be very damaging for the drivers’ incomes, for household income, the economy in general.

“So, in a way, we sort of felt it needed to be our responsibility as well. So, for these drivers, we are subsidising the upfront cost to the point that the goal is to make sure [there is] zero upfront cost,” says Goh.

Grab also introduced a daily e-hailing insurance policy for its driver-partners on June 12, in partnership with panel insurers such as CHUBB, Tokio Marine Insurance Group, etiqa and Allianz. With this product, driver-partners only pay for the insurance coverage — valid for 24 hours — when they get online. 

Without the regulatory hurdle, he says the ride-hailing service industry is at its most stable in the sense that it is easy for customers to get a driver at a cheap-enough fare while drivers get their fair share of income.

“I think Malaysians have really proved to be resilient in the first place... they have gone out of their way, taken the extra time to earn the extra income to begin with, without any encouragement or support. I think the very least that we can do is not to put up barriers,” he adds.

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