This article first appeared in Digital Edge, The Edge Malaysia Weekly on November 15, 2021 - November 21, 2021

Since Uber’s exit from Malaysia in 2018, there has been no mistaking Grab’s dominance of the local e-hailing landscape. The company commanded 72% of the local e-hailing market in 2020, as stated in its latest initial public offering (IPO) documents. Still, new market entrants like AirAsia Ride (launched in August) are primed to carve out their own section of the market.

Timing plays a significant role in this equation, says AirAsia Ride CEO Lim Chiew Shan. In 2017, the local e-hailing market was fast-growing, with around two million active users. However, the industry had yet to be properly regulated and was facing numerous issues.

“There was an element of driver suppression at the time. The driver didn’t set the price of the job; the e-hailing company did. So, drivers were forced to accept rides at the given price, and they were not allowed to switch platforms. It was around that time when drivers were really struggling because they had committed to purchasing a new car to get the job,” says Lim.

“Before October 2019, there were over 40 companies in Malaysia, and anybody who knew how to develop an app could start such a service. Then came the government regulations, which are good. It ensures the quality of e-hailing drivers, and both drivers and passengers have forms of protection. But we saw a lot of non-serious players moving out of the market, and very few e-hailing service providers remain.”

With much of the competition out of the way and the rules of the game in place, the folks behind AirAsia Ride believed that it was the right time to enter the market. The parent company had planned to include e-hailing as part of the AirAsia super app from the get-go, but they had to postpone the launch to early this year due to Covid-19 restrictions and efforts to vaccinate the drivers.

The top issue on Lim’s mind is the industry’s current lack of available drivers. Since the regulations were put in place, the barriers to entry for e-hailing drivers have increased dramatically. Not only are they required to attend training and undergo medical check-ups, but they can only drive cars that are less than 10 years old and have been inspected by the authorities. 

“Previously, we had more than 250,000 drivers in Malaysia. I believe that we have less than half of that actively driving today.

“Hence, we are focusing our attention on not only making sure our drivers are qualified, but also happy. The industry is gearing towards making sure the drivers are satisfied, which in turn translates into happy customers,” says Lim. 

To attract more drivers, Lim’s key focus will be on providing them with more flexibility. Overall, AirAsia Ride’s driver reward system is not too different from that of the competition. Drivers climb the ranks by accepting rides and obtaining good ratings, which will in turn provide them with even more rides. 

However, there are a few exceptions. Firstly, drivers are not pressured to accept rides because there are no penalties if they do not. The platform only takes a 15% commission fee, which is 5% lower than Grab. Drivers are also able to accept other tasks, such as delivering food and parcels to supplement their income. In fact, AirAsia Ride does not restrict drivers from participating in other platforms, and actually encourages moonlighting to spread the company’s brand awareness.

“In some platforms, the drivers will be penalised after rejecting rides above a certain threshold, such as one in 10 rides. To us, the drivers are not our employees, but instead partners. Penalising drivers for not taking rides does not reflect a partnership. If drivers do not want to take the ride, we give it to the next one, because that’s how the algorithm works,” Lim says.

The company is also looking to be more flexible in providing unique solutions through its driver communities, which separates drivers based on vehicle type and services. In addition to the standard communities such as standard and premium rides, drivers are free to set up new communities of their own.

Lim gave an example of their driver community in Langkawi, where passengers can book a driver by total hours instead of trips. For tourists who do not wish to rent a car, the AirAsia super app allows them to hire a driver for the day.

“Apart from that, we also provide users with the ability to select recommended drivers nearby. Click on them, and you can read their backstory, and book them directly because these drivers are generally highly rated, and they are more likely to provide good service,” he says. 

Allowing drivers to reject rides comes with a compromise — longer passenger waiting time. To address this, Lim explains that the success of any e-hailing business hinges on two types of passengers.

The first wants a ride as quickly as possible and is willing to fork out a premium to do so. The second type of customer values savings and does not mind waiting longer, who are usually daily commuters. In typical AirAsia fashion, it opts to target the latter.

“Our prices are competitive, but it doesn’t mean that they are cheap. We had to constantly analyse how much the customer is willing to pay, and how high it must be for the drivers to willingly accept the fare. Factor in the time of day and traffic conditions … and it is a tough balancing act,” says Lim. 

“Combine the density of the drivers in a location to give a faster response time, and the pricing itself — this is what the consumer looks at. So, if you are a consumer who does not mind waiting, you can try us out. If you are looking for a faster ride, then you may try the other apps. Consumers do have freedom of choice.”

Due to its focus on value, Lim is trying to position AirAsia Ride as the passenger’s default option before trying other platforms. There is a chance that the passenger will be  able to get a ride in under three minutes on the cheap, depending on driver density. But if the passenger grows tired of waiting after a while, he is free to switch to other more premium e-hailing providers.

Despite the recent launch, the company already has a long list of registered drivers. However, they are not ready to work immediately due to government-mandated training programmes. Hence, the platform is activating its drivers gradually according to passenger demand. This way of operating is also good for the company’s finances. Rather than entering the market with a big bang, Lim explains that the company is adopting a slow burn strategy.

“If we burn a lot of money from the start and obtain a lot of customers, we can’t be sure if we have enough supply of drivers to accommodate them,” he says.

“E-hailing can be a profitable business, a cash cow even, if managed properly. The good news is, the industry is already mature. Consumers already know what e-hailing is, thanks to the early players and market adopters. It saves a lot in terms of education costs, which allows us to be more competitive in terms of pricing while still obtaining trial services.”

Lim is fully aware of Grab’s dominance in the marketplace and understands that its business model is not drastically different from AirAsia Ride’s. However, he believes that positioning itself well in the marketplace is enough to carve out a section of the pie that it can call its own.

“Yes, most providers have dynamic pricing, but our prices are more competitive than others’. On the driver side, we also have rankings and a rewards system, but it is based on encouragement rather than penalisation,” says Lim.

“It may seem like we are doing the same things, but we are targeting a different result. We want to build a less stressful and more flexible environment for the drivers. On the consumer side, we want to balance waiting time and low cost, while ensuring that it covers the driver’s expenses and still provides a steady profit.

“We do not want to overly differentiate ourselves by aiming to disrupt the market, because whatever we do, the competitors can do as well. But it is the small things and decisions we make along the way that can help us grow and gain traction. This is as long as we stay true to our mission of providing flexibility to drivers and fair pricing to consumers.”

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