THE battle of the ride-hailing giants is maturing from pure price war into a multi-layered fight, say industry watchers, following Gojek's latest fundraising of over US$1 billion.
On Friday, Gojek announced it has finalised the first close of its ongoing Series F round, led by existing investors Google, JD.com and Tencent. Other investors include Mitsubishi Corp and Provident Capital.
Over US$1 billion was raised, according to industry sources. This values Gojek at between US$8 billion and US$10 billion.
Gojek will use the funds to double down on key verticals in Indonesia and strengthen its regional footprint. The company operates in the transport, food delivery and payments segments in its home market, Indonesia. It recently expanded its transport service to Singapore, Thailand and Vietnam.
Gojek will also further its strategic partnership with JD.com in Indonesia, via e-commerce joint venture, JD.id, and last- mile delivery logistics venture, J-Express.
With players boasting bigger war chests, the ride-hailing industry is now evolving from "primarily single journey price competition model to a more multi-layered competitive environment", Oliver Redrup, director specialising in transport at PwC Singapore, told The Business Times.
"The ride-hailing companies realise that competing on price alone is not a long-term sustainable model and they are focusing on offering a broad spectrum of quality services to build customer loyalty and control more of the daily spend," he said.
Hian Goh, co-founder and general partner of Openspace Ventures - an early backer of Gojek - agrees. He said Gojek moved past cheap fares shortly after its debut in Singapore.
"The initial burst, where you could take a S$6 Gojek ride, was very enjoyable but lasted for under a month. That's an effective launch technique... You can see now, surge pricing is there. Gojek is not using price to compete anymore. They used it to enter the market, but not now, and that's healthy," he said. Openspace invested in the company in 2014.
In Indonesia, Gojek's core appeal is its integration with an e-wallet and "convenience and functionality", and not simply low fares, he said. He sees the ride-hailing landscape in Singapore shaping up the same way.
With Gojek's entry, Grab no longer has a stronghold on pricing power, given that consumers can compare fares easily and "vote with their feet". "So they are going to find ways to compete with each other beyond giving the lowest price."
Beyond non-price competition, another element of intrigue is how two players native to South-east Asia will battle it out, said Rachel Lau, managing partner of RHL Ventures, a Malaysia-based multi-family private investment firm.
"Previously, it was local champions versus a foreign competitor, Uber. But with cultural assimilation from both sides, the war might end up being about the ability to manoeuvre amid regulations and whoever has deeper pockets," she said.
While both companies boast marquee investors, Gojek's slate is heavy on financial investors, while Grab's comprises more strategic investors, she said. Which line-up will provide companies a better edge remains to be seen.
"The motivations of investors will determine the ability of the companies to either invest in the future or have a short-term focus on profits," Ms Lau said.
Christopher Quek, managing partner of venture firm Trive, expects that e-wallets will continue to be at the forefront of both players' strategies.
"Once you control the e-wallet, many services can be controlled. Grab's [reported] acquisition of a stake in Ovo, which has 60 million downloads in Indonesia, and Gojek's US$72 million acquisition of Coins.ph in Philippines, with 5 million users, shows the seriousness of the challenge," he said.
For now, Mr Goh of Openspace sees Gojek's latest fundraising as affirmation from tech giants that the company is on the road to becoming a "regional tech powerhouse".
As ride-hailing players expand into more verticals as part of the super-app strategy, the nature of their backers will evolve, said Mr Redrup of PwC.
Speaking broadly of the ride-hailing industry, he said: "This is having an interesting impact on where these ride-hailing companies are seeking investment from - originally it was focused on technology companies, private equity, transport companies and car manufacturers, but they are now receiving investment from retailers."