Global Ride-hailing - Dominant Players Focus on Profitability
Ride hailing 1Q24 results: Ahead of market expectations. US ride hailing players beat market expectations on both revenue and margin in 1Q24, led by strong traction in key international markets while...
Chief Investment Office - Hong Kong26 Jun 2024
  • The global ride-hailing industry is exhibiting resilience against inflation and post Covid-19 normalisation
  • Key catalysts are: a) reduction in driver supply and b) pick-up in food delivery orders
  • Food delivery and ride-hailing industries are projected to grow at CAGR of 10.3% and 9.6% between 2024 and 2029
  • Dominant players in both US and Southeast Asia continue to gain market shares on scale advantage
  • Improvement in profitability and encouraging earnings outlook are among the key drivers for rerating
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Ride hailing 1Q24 results: Ahead of market expectations. US ride hailing players beat market expectations on both revenue and margin in 1Q24, led by strong traction in key international markets while Grab followed suit by beating market expectations on cost controls and ride-hailing (Mobility) segment performance. The latter expects more growth to stem from Tier-1 cities driven by increasing the frequency of retention.

Guidance among US players for 2Q24F has been in line with market expectations on profitability, driven by efficient pricing, matching, and incentives. In Southeast Asia, Grab revised up its FY24F guidance on the back of strong ride-hailing demand and further cost structure optimisation.

Double-digit growth expected in the medium term; Big potential upside for penetration rates. According to independent industry research, global food delivery1 and ride-hailing markets2 are expected to grow at a CAGR of 10.3% and 9.6% respectively over 2024-2029 on rising penetration rates off low base. As US industry players do not distribute big incentives to drivers, they are able to command superior EBITDA margins for two key reasons:

  • Firstly, most US drivers own their cars and do not bear the car-leasing fee unlike drivers in Southeast Asia who usually spend 30-50% of their daily earnings on car leases.
  • Secondly, US consumers tend to pay an additional 15-20% of their order value in tips to the drivers for food-delivery services compared to less than 5-10% who do so in Southeast Asia. As such US companies generally pay relatively lower commissions to drivers.

Prefer companies with dominant market share in ride-hailing and delivery services. Players offering both ride-hailing and delivery services can (i) broaden their appeal to younger customer base who are more frequent users of food delivery services, (ii) deploy their delivery resources for ride-hailing service outside the peak hours, and (iii) offer cross-selling benefits from the use of loyalty points and other promotions.

On-demand players in Southeast Asia have ventured into fintech services where huge untapped potentials remain for digital lending services. While not currently profitable, fintech services are likely to see reduction in losses as marketing expenses have peaked.


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