Taxi & Bus Transportation Operators in Indonesia Under Pressure
Taxi and bus operators in Indonesia are having a tough time. Due to rising competition in the nation's land transportation services sector, corporate earnings of the traditional players are on the decline, while new players are seeing improving earnings. Indonesia's traditional transportation services operators (particularly taxi and bus operators) are plagued by the presence of app-based transportation services (such as Grab, Uber and Gojek) as well as new railways and airports that are being developed as part of the government's grand infrastructure development ambition.
Six out of nine land transportation operators (listed on the Indonesia Stock Exchange) have recorded a net loss in the third quarter of 2016. The remaining three indeed recorded net profit but far below earnings that were recorded one year earlier.
Stakeholders in Indonesia's land transportation services sector blame the weak earnings on the bleak economy. In Q3-2016 Indonesia's GDP only grew at 5.02 percent (y/y), down from 5.19 percent (y/y) in the preceding quarter. Leonard Stephen Jonathan (General Director at Citra Maharlika Nusantara Corpora) and Adrianto Djokosoetono (Operational Director at Blue Bird) said bleak GDP growth and purchasing power makes passengers think twice about taking trips. Passengers may also be eager to find cheaper transportation solutions, for example a motorcycle taxi to save money.
Taxi operators in Indonesia are having a tough time competing the app-based transportation services such as Uber and Grab. These ride apps offer cheaper rates, while another major advantage for the ride app passenger is that the tariff is agreed beforehand. The traditional taxi driver may not take the fastest route as this enables him to make a bit more money, while the ride app driver will be eager to take the fastest route. This makes app-based transportation more efficient and consumer-friendly.
Both Fitch Ratings and Pefindo believe that the app-based transportation services providers will continue to undermine the earnings of Indonesia's taxi operators. The two biggest taxi operators in Indonesia are Blue Bird and Express Transindo Utama (both are publicly-listed companies).
After demonstrations were staged - in March 2016 - by taxi drivers, the Indonesian government unveiled Ministerial Decree No.32/2016 on the Operation of Taxis. This regulation states app-based transportation firms are required to partner with a registered local transportation company (and needs to have an official workshop as well as a minimum fleet of five cars that all undergo roadworthy tests).