Driver shortages: An increasingly dire issue for e-hailing companies in Malaysia

• There have been more complaints over the last few months regarding the surge in prices for e-hailing services in Malaysia, mainly due to driver shortage, especially during peak hours.
• Many drivers refuse to accept passengers at peak hours due to the worsening traffic in the cities, thus exacerbating the driver shortage, pushing prices up by a staggering 400%.
• Grab and inDriver are ramping up efforts to attract new driver-partners.
• A Gojek car, Indonesia-based ride-hailing giant, has been spotted in Kuala Lumpur, raising speculation on the possibility of another player in the market.

Remember when e-hailing first came about? It took the world by a storm, and for countries like Malaysia, it disrupted the taxi industry. Love it or hate it, the idea spelled convenience for many and at the same time, it has been among the biggest contributors to the gig economy. But what happens when these e-hailing platforms are lacking in resources, like drivers?

Drivers are essentially the most critical part of the business and what was once the most sought after jobs among gig workers, is now turning into a dreaded space to be in. That is exactly the case with ride sharing companies in Malaysia — especially Grab and inDriver, which have respectively been making moves to retain and even attract new drivers to meet surging demand. 

For context, ever since the economy began reopening in Malaysia earlier this year, most of the local workforce have started returning to office. Inevitably, that has led to a spike in demand for e-hailing services locally. After all, ride sharing services were meant to reduce travel costs, traffic congestion, and more ambitiously, emissions. Unfortunately, it has been almost the exact opposite in the country.

Instead, traffic congestion, especially in cities, only got worse than pre-pandemic levels, leading to a mounting complaints on the spike in fares among e-hailing companies. The reality with the pricing is that demand were skyrocketing but supply wasn’t sufficient — especially at peak hours. That has in turn, created a seller’s market, namely a situation in which the price is set by the seller or service provider.

To give you an idea — a typical Grab fare from KL Sentral (city center) to Old Klang road (suburb) costs RM14 during non-peak hours, around 2.00pm. However, during peak hours between 5pm to 8pm (sometimes later), the fare more than doubles up to RM38 — for the same 12km journey. Making matters worse, it is almost a battle to secure yourself a driver not just at peak hours, but also during public holidays and during bad weather conditions. 

To top it off, e-hailing drivers in Malaysia have admitted to switching off their apps mainly to avoid accepting a ride at peak hours for one, almost-unavoidable reason — the worsening traffic congestion. Although users are provided with a wide range of other e-hailing options such as MyCar, Maxim, AirAsia Ride and InDriver which charges reasonable fares, it’s almost impossible to secure a driver nevertheless.

That basically means one thing — e-hailing companies in Malaysia are struggling with their drivers — or the lack of it. What was once an occasional issue, has definitely turned dire at this point.

What are e-hailing companies in Malaysia doing about it?

Since June 1 this year, Grab Malaysia has been offering a sign-up bonus of up to RM1,000 for new driver-partners. The offer that will continue until July 31, 2022, is a major push by Grab to bring more drivers on board, “to better serve its driver-partners and make transportation accessible for all passengers,” the Southeast Asian e-hailing giant said in a statement yesterday.

Grab Malaysia director of country operations and mobility Rashid Shukor admitted that as of mid-May this year, the number of driver-partners on their platform still remained less than 70% of what it was pre-pandemic. “One of the many reasons is the long and costly process imposed on drivers before they get on the road,” he said.

Since new drivers are required to complete numerous steps to meet regulatory requirements, Grab realized it places a structural limit to how quickly a new driver-partner can start driving. “[Considering how] a financial investment amounting to more than RM500 is needed by each new driver-partner to come on board, such barriers to entry affect the time it takes for supply to catch up with the sharp increase in demand,” Rashid added.

Therefore, Grab has decided to also extend its existing reimbursement of up to 100% of total driver-partner regulatory compliance cost, to help minimize their cost burden. “We hope that this supply and demand imbalance will be transient, as we race against time to onboard new driver-partners,” he concluded.

Just before Grab announced its efforts, US-based inDriver also announced that they are seeking to attract more users, particularly drivers, to meet the increasing demand for e-hailing services in Malaysia. inDriver’s director of ride-hailing for the Asia Pacific Roman Ermoshin said, the current supply-demand imbalance presented an opportunity for the company to strengthen its user base further.

“inDriver has been working on improving app features to encourage more users to join the platform. We have implemented a slew of enhancements for a better user experience, primarily for the drivers. These will allow for a more effective and productive way for them to earn money through the inDriver platform,” he said in a statement.

Among the feature enhancements introduced to the app is a chat function that enables easy communications between drivers and passengers while maintaining users’ privacy. A new feature called “On the way” was also introduced as a means to improve driver’s income opportunity. “With this feature, drivers can tap the “On the way” button, enter their destination address, and receive ride requests as they move towards their destination. This will benefit drivers in terms of time and cost savings,” Roman said.

The company also decided to implement service payment to its drivers in Malaysia. Basically, the international e-hailing app introduced a 9.54% service payment, which will be deducted from the total amount of fare per ride. The rate of the service payment is set lower compared to other ride-hailing services operating in Malaysia, to ensure inDriver drivers can still benefit from its unique fare negotiation feature while continuing to receive profitable rides.

Unlike Grab and other app-based ride-sharing services, inDriver’s model allows passengers and drivers to set their own prices. InDriver provides a recommended price, with caps in place, but both passengers and drivers have room to negotiate. Passengers can suggest their price, and drivers can either accept the offer or make a counteroffer. 

Just as drivers can choose between the rides they want to accept, passengers can also choose based on offers from multiple drivers: it’s like an auction, with the haggling done quickly and efficiently on the app. According to inDriver, that approach is key to ensuring both fairness and transparency. 

While it is still new for anyone to conclude if these moves by the e-hailing companies would bear fruit, it is still mostly in the hands of their existing and incoming drivers to consider if the latest ‘enticement’ would be worth their time spent on roads, especially during peak hours. 

Is Gojek making headways into Malaysia?

There are currently 33 e-hailing companies registered with the Land Public Transport Agency (APAD) of Malaysia — and it looks like another one might be on its way. Grab’s rival Gojek, an Indonesian ride-hailing giant, was recently spotted in Kuala Lumpur, according to Vocket.

The report highlighted that a Honda City bearing the Gojek logo was recently spotted in the country’s city center. “In front of the car was another vehicle with a crew that seemed to be filming the Gojek car, along with a police outrider accompanying them,” Vocket said. While there has yet to be any announcement from Gojek, the sighting might signal the possible emergence of GoCar e-hailing service to the Malaysian market.

Gojek entering the country, albeit with cars instead of its bike-hailing service as it initially intended, might just challenge Grab, the current dominant player in the market. However, with countless other players struggling to even gain a foothold with their drivers, it remains to be seen if adding another player into the equation would solve the existing price crisis.

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