It is confusing.
I cannot quite understand CDG JV with Uber. In the surface of it, it make sense, CDG has a app that works better and consumer can call for both cab or non-cab, and decide if they want surge charging with PHv or just plain peak surcharge. If that is the sole reason, they should just work with Grab and let the CDG drivers use their app. Definitely cheaper than buying Lioñ Rental
But given CDG Pay so much for Lioñ rental, it would means CDG believe the future taxi business is one of PHV and perhaps some flag down opportunities for thos who dun use app. ( maybe tourists? )
It then can laterally transfer drivers, or for taxi drivers who wanted to become PHV drivers, to stay within the family. But this is a reduce bleeding strategy, not a growth strategy.
So how lucrative is the business ??
The aggregate cash consideration for the above acquisition is estimated at S$295 million and arrived at based on the net asset value of approximately S$642 million based on the value of about 12,450 vehicles. “
Each vechicle is worth about 45K. In the news media, it is said that Lioñ City Rental has a fleet of about 14k. I think CDG has a good deal in the sense it assume about 90% of the fleet can be rented out at any time.
45k can only pay for COE in recent years but we all know vechicles are depreciating assets.
The rental rate of vechicle for Uber drivers is up to $58. If u renting for private consumption, it cause a bit higher. Let’s assume a rate of $50 for simplicity sake.
A attrage is for rent at $47.
Assume the car is rented out for 360 days in a year. 1 year of revenue is 18K. Assume CDG can achieve economic of scale and manage the fleet at low cost and achieve margin of about 50%. It needs 5 years to break even. I think most cars will have a COE or at least 7-8 years since Lioñ Rental City is only started by Uber in 2015.
Yield accretive but nothing to shout at.
However, it does give it a immediate sizeble Market share of the PHV. From what I read, it’s range from 40k vechicles to 60K. At least 25% market share with a blink of an eye.
Uber also has various incentive for drivers who clock a certain no. Of rides so I would think my calculation above is liberal and the margin lower. But Uber dun seem to be as aggressive in giving out promo code.
It’s a good counter move by CDG strategically but if anyone wants to see fireworks in terms of earning, think they will be disappointed.