Taxi operators will eventually become REITS management companies

This article is contributed by a Singapore-based investor who has previously lived in Europe, with slight editing from TLD. The author, who previously wrote about why Mobility-as-a-Service does not work in Southeast Asia, prefers to remain anonymous. Comments and discussions can be channeled through [email protected]. 

A friend of mine shared screenshots of a Didi promotional video to me. In the video, a few ex-entrepreneurs and ex-financial professionals talked about their journey becoming private hire drivers. The tagline on the screen is “Positive energy”.

The friend who shared this joked: “fortunately you came out of your entrepreneurial journey alive, and do not have to drive for Didi instead.”

However, I feel that being a driver should not be the end of these people’s career. Because, sooner or later, the bulk of such jobs will give away to autonomous driving.

When that happens, fleet operators will become REITS management companies, operating a fixed set of asset to generate a more or less fixed income. Economies of scale and efficiency will no longer be important as the service will be highly commoditised.

The debate is whether this will take 5 years, 10 years or more – the eventuality is, however, inevitable.

How about ride hailing platforms like Didi and Uber, you might ask. Have you not figured out that the key value of such platforms is NOT the fleets they operate, but the customers they have?

That’s why many of them, especially those showing a positive cashflow from the ride hailing business such as Grab, are building more services to better retain and monetise the customer base.