New Entrant Grab Disrupts Singapore’s Taxi Landscape

UOB Kay Hian | 4 April 2025

ComfortDelGro Faces Increased Competition as Grab Enters Domestic Street-Hail Segment

Singapore’s dominant taxi operator ComfortDelGro Corporation (CD) is set to face heightened competition as ride-hailing giant Grab launches its new GrabCab service, becoming the sixth taxi operator in the city-state.

Grab’s Entry Raises Concerns for Incumbent Taxi Operators

Grab has been awarded a 10-year license to operate street-hail services in Singapore, making GrabCab the newest entrant in the domestic taxi market.
GrabCab will be given a 3-year grace period to gradually expand its fleet to meet the minimum requirement of 800 taxis.
Like existing taxi operators, GrabCab’s taxis will have prominent rooftop signs and a distinctive livery to be easily identifiable by street-hail customers.
GrabCab’s taxis will also follow the same fare structure components as other operators, with fares prominently displayed.
To attract new drivers, GrabCab plans to sponsor the Taxi Driver’s Vocational Licence (TDVL) fees and provide 6 months of National Taxi Association membership for new recruits.

Increased Competition to Weigh on Incumbent Operators

Street-hailing trips, exclusive to traditional taxis, have been on a constant decline, while ride-hailing trips now make up 89.6% of total point-to-point (P2P) trips in Singapore.
With GrabCab’s entry into the already shrinking street-hail segment, incumbent operators like ComfortDelGro (CD), which holds a 65% market share, are expected to face heightened competition.
We expect taxi rental utilization rates for incumbents to fall as drivers may be incentivized to switch to GrabCab due to its larger digital platform and potentially lower daily rental rates.
This could result in margin compression for CD’s taxi segment, as its operating margins are around 18-20%.

Mitigating Factors for ComfortDelGro

While GrabCab may offer promotional incentives in the short term to attract customers, we expect its daily rental rates to be similar to CD’s in the long run, limiting the negative impact.
CD’s sizeable online presence through its Zig app also makes it less vulnerable to the risk of taxi drivers switching to GrabCab’s platform.
Upcoming acquisitions like A2B and Addison Lee are expected to provide an inorganic boost to CD’s taxi segment, offsetting some of the competitive pressures.
Margins in CD’s UK bus business are also expected to continue improving, supporting the group’s overall profitability.

Maintaining BUY with Unchanged Target Price

Despite the increased competition, we maintain our BUY recommendation on CD with an unchanged target price of S$1.76.
CD’s strong earnings growth and decent 2025 dividend yield of 5.8% continue to underpin our positive view on the stock.
While GrabCab’s entry may have a slight negative impact, CD remains one of our top picks in the transportation sector for the first half of 2025.