Why Ride-hailing Company Will Hamper the Growth of the Automotive Industry in Indonesia

In the last couple of years, many people have argued that ride-hailing company (Gojek) actually marked a new beginning in Indonesia when it comes to digitalization, that Indonesia finally reached a new level in entrepreneurship. But, I argue, that although ride-hailing companies possess incredible power to connect people through its services but they’re at the same time possess a threat to Indonesia automotive industries’ growth



The notion of ride-hailing companies are good for the automotive industry is delusive, it might drive the sale of the company up for certain period of time but it failed to recognize the main reasons why people are willing to pay a certain amount of money for a vehicle. In the last couple of years, many people have argued that ride-hailing company (Gojek) actually marked a new beginning in Indonesia when it comes to digitalization, that Indonesia finally reached a new level in entrepreneurship. But, I argue, that although ride-hailing companies possess incredible power to connect people through its services but they’re at the same time possess a threat to Indonesia automotive industries’ growth.

Being Indonesian means living in a country where the public transportation and even the infrastructures are not in the best shape, therefore, reducing the growth of the public transportation user. Thus, these conditions are the main ingredients that allow the automotive company to flourish and rose to the pinnacle of Indonesian business. This is mostly because they’re able to solve the main mobility problems in Indonesia while offering a reasonable price affordable for everyone. Essentially, Indonesian has no option when it comes to mobility, they have to have at least one vehicle in order to support their mobility at an effective rate. But that’s no longer the case, especially when the ride-hailing company began to rise in early 2015 when in a sudden they’re making mobility way more affordable and convenient.

Initially started by Go-jek in Indonesia, now the market is witnessing the fierce competition between Go-jek and Grab, two ride-hailing unicorns backed by some well-known investors. Given the fact that Indonesia has more than 200 million of untapped market, each of the players won’t let the slightest pie go into their competitor’s pocket. There’s a hidden promise offered in this competition in order to dominate the market; the prices will be at a rate in which it will never hurt the consumers. In fact, these companies will keep on burning their capital in order to achieve the desired growth and drive their competitor out of business. What does this mean to the Indonesian people? They will keep on enjoying the cheap fees offered by this company at least for the next couple of years and therefore eliminated their necessity to buy a vehicle for daily use.

According to a study from ScienceOne Data with data sources obtained from ComScore in 2017, the number of users (unique visitors) of Grab and Gojek are not much different (8.6 million and 8.8 million per month). While the number of Uber users are about one quarter (2.3 million per month). Since Uber is no longer in the business, we can assume that 2.3 million users will disperse. At this rate, more and more people are going to use the ride-hailing over a conventional company. Which translate to, the diminishing urgency of a private vehicle.

The result has yet come to an end. But it’s likely that ride-hailing company will be hampering the growth of an automotive company. It’s still too early to estimate the total cost that ride-hailing company caused to the overall economy as the market is still evolving and adapting to the new model of business offered by ride-hailing companies. But one thing for sure, in the case of disruptor there will always be a disrupted industry. And in this case, it’s not just the transportation services but also the automotive industry.





Cover photo: REUTERS

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Why Ride-hailing Company Will Hamper the Growth of the Automotive Industry in Indonesia
In the last couple of years, many people have argued that ride-hailing company (Gojek) actually marked a new beginning in Indonesia when it comes to digitalization, that Indonesia finally reached a new level in entrepreneurship. But, I argue, that although ride-hailing companies possess incredible power to connect people through its services but they’re at the same time possess a threat to Indonesia automotive industries’ growth
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