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Ridesharing companies the big winners in recent fare hikes amidst soaring fuel prices in Vietnam

Ridesharing companies the big winners in recent fare hikes amidst soaring fuel prices in Vietnam

Saturday, March 19, 2022, 10:00 GMT+7
Ridesharing companies the big winners in recent fare hikes amidst soaring fuel prices in Vietnam
App-based drivers are pictured in Ho Chi Minh City. Photo: C.Trung / Tuoi Tre

Operators of ride-hailing and delivery service apps in Vietnam seem to be pocketing much of the extra profits from the recent fare hike supposedly levied to account for fuel prices, with drivers and customers seeing almost no benefits.

Grab was the first firm to increase the fare of all services due to rising fuel costs in the country, followed by Gojek.

The fare hike was supposedly levied to ensure the best service quality for customers and to help drivers partially offset operating costs while encouraging them to work more, according to these companies.

However, the main beneficiaries of the increase seem to be the companies themselves given the unchanged commission rate.

Grab currently charges its driver partners a commission of 31.5 percent, meaning the firm earns VND315 (US$0.014) for every VND1,000 ($0.04) if its fare is increased, despite the company not being directly affected by the surge in gasoline prices.  

According to a GrabCar driver, the cost of a 10-kilometer journey has increased from about VND120,000 ($5.2) to VND130,000-150,000 ($5.6-6.5).

Drivers, however, have not seen their income budge, said Canh, a delivery partner of Grab who is currently taking a break from driving.

Soaring fuel prices have resulted in the jump in operating cost and a drop in number of customers and orders, Canh continued.

“A three-kilometer delivery now costs about VND25,000 [$1], but the driver only receives VND16,777 [$0.7],” he elaborated.

After spending on gasoline and vehicle maintenance, the driver does not have much left, he added.

Aside from the fare increase, customers still have to pay various types of surcharges, including route change fee, night fee, and rain fee, each of which cost VND5,000-10,000 ($0.2-0.4).

All about profit

The nature of the increase in fare is for the companies that own rideshare and delivery apps to profit, Nguyen Cong Hung, chairman of the Hanoi Taxi Association, told Tuoi Tre (Youth) newspaper.

As ridesharing services occupy an increasingly large market share, such major companies as Grab have been implementing strategies to boost their profits, and the rising fuel cost is one of the reasons for their fare hike, said Dinh The Hien, an economic expert.

The firms benefit from the fare increase through their commission rate, which is about 30 percent, while the drivers and customers are still directly affected by rising costs.

The best way these companies can provide their support for both drivers and customers is to lower their commission rate, Hien stressed.

According to traffic experts, it is necessary to monitor the changes in fares of local transport businesses during this period for possible signs of non-transparent increases.

Petrol prices in Vietnam reached a new high on March 11 after the Ministry of Finance and the Ministry of Industry and Trade adjusted them upward for the seventh consecutive time this year.

The price of E5RON92 gasoline jumped VND2,910 to VND28,980 per liter, while that of RON95-III fuel climbed VND2,990 to VND29,820 a liter. ($1 = VND22,873)

Be goes against the trend

Among the popular ride-hailing apps in Vietnam, Be is the only one that did not increase its fare. In fact, the company also decreased its commission rate.

The firm announced that it would not raise the fare of all services, including motorbike and car ridesharing, delivery, grocery shopping, and food delivery, in a bid to support customers and contribute to transport cost stability.

Be has also cut down its commission rate for beCar drivers to 10 percent in the context of skyrocketing gasoline prices.

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Duy Khang - Cong Trung / Tuoi Tre News

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