17 October 2019 (closed)
USD/IDR (14,140) -32.00 -0.23%
EUR/IDR (15,731) +30.31 +0.19%
Jakarta Composite Index (6,181.01) +11.42 +0.19%
Indonesian ride-hailing company Go-Jek, one of the nation's unicorns, confirmed its plans to expand into other countries in the Southeast Asian region. Over the next couple of months the company will invest USD $500 million to start delivering its ride-hailing services in Vietnam, Thailand, Singapore and the Philippines. Earlier, Go-Jek had already expressed its intention to expand beyond the borders of Indonesia. This time, however, it has given more details about its plans.
Go-Jek's strategy to grow into neighboring countries will be rather similar to the approach it had used in Indonesia. In the first stage it will only deliver ride-hailing services, meaning that people can order car or motorcycle rides through an application on their smartphone. Then, in a later stage, other services may be added. In Indonesia Go-Jek now offers a wide range of services through its mobile app ranging from food-delivery, massages, package delivery, to cleaning services. It also added digital payment services and therefore acquired three financial technology (fintech) companies in 2017.
Go-Jek's expansion move means that the company is set to challenge Singapore-based Grab in the other big (emerging) markets of Southeast Asia. Currently, these two companies are the two biggest forces on the Indonesian market, with Go-Jek in leading position (but the gap with Grab is narrow). In the four new markets Go-Jek will team up with local partners as part of its expansion strategy.
Nadiem Makarim, Go-Jek CEO and Founder, commented on the expansion plans saying: "Consumers are happiest when they have choice and at the moment, people in Vietnam, Thailand, Singapore and the Philippines do not feel that they are getting enough when it comes to ride-hailing. We hope that as we arrive in new markets, we will quickly become everyone's go-to lifestyle app. That is our aspiration. In the meantime, we hope our presence will provide the welcome competition markets need to thrive".
Go-Jek has seen significant capital injections in recent months. In January 2018 Caesar Sengupta, Google Vice President of Product Management, confirmed that Google invested in Go-Jek. He said it is part of Google's strategy to support and to participate in the thriving Internet economy of Indonesia. With more than 133 million Indonesians "being online" in the world's largest archipelago (and the world's fifth-largest Internet population), Internet and Internet-related activities have become increasingly important in this country. Meanwhile, with only about 50 percent of the total population currently being online (Indonesia numbers more than 260 million inhabitants), the journey has only just begun.
One month later, in February 2018, more capital injections into Go-Jek followed from companies such as Astra International, JD.COM, Meituan, Tencent and Temasek. In total Go-Jek raised approximately USD $1.5 billion through the fundraising round, exceeding its initial target of USD $1.2 billion. Go-Jek is currently valued at USD $5 billion.
Having success in a foreign ride-hailing market is not an easy job. Indeed Grab managed to get a strong hold of the Southeast Asian market but generally the market is dominated by local startups. Therefore, Uber Technologies Inc decided to sell its operations and assets in the Southeast Asian region to Grab in March 2018. Through this consolidation-move, Uber will obtain a 27.5 percent stake in Grab, while Uber's chief executive officer joins the board of Grab.
This development should turn Grab into a stronger player, both in Indonesia and in other markets in Southeast Asia. Therefore, Go-Jek's decision to challenge Grab in other Southeast Asian markets is a brave one but it will become very difficult to threaten Grab's leading position outside Indonesia.
The Southeast Asian region is one of the world's most attractive regions for the digital economy as this region is home to 640 million people, while the region is also characterized by rapid economic growth as well as rapidly rising smartphone and Internet penetration. Therefore, Southeast Asian ride-hailing market is forecast to reach a value of USD $20.1 billion by 2025.