Why XanhSM Might Dethrone Grab in Vietnam

After acquiring Uber’s Southeast Asian operations in 2018, Grab has established itself as the leading player in the region’s ride-hailing industry. In Vietnam, as of March 2023, the Singapore-based giant held a commanding 66 per cent and 60 per cent share in the car and bike ride-hailing sectors, respectively. However, Grab’s dominant position in the country may soon be challenged by XanhSM (Xanh means “green” in Vietnamese), a new ride-hailing platform backed by VinFast, the automotive division of Vingroup, one of Vietnam’s largest private conglomerates.

Grab’s new rival, also known as GreenSM in international markets, is a brand of GSM Green and Smart Mobility Joint Stock Company (GSM). The company, founded in March 2023, is wholly owned by the family of Pham Nhat Vuong, the founder of Vingroup, with Vuong himself holding a 95 per cent stake. GSM currently provides taxi, ride-hailing, delivery, and car rental services. The company prides itself on its commitment to “green and smart mobility”, as its whole fleet is electric vehicles (EVs) purchased from VinFast.

By the end of 2023, according to a source familiar with XanhSM, the company had successfully offered services in 29 out of 63 provinces and municipalities across Vietnam, with more than 20,000 cars and roughly 22,000 motorbikes. In November 2023, the company launched its services in two cities in Laos, marking its first step to go international. GSM also has plans to expand to other regional markets, including the Philippines and Indonesia. This is a remarkable feat, given that the company has been operational for less than a year.

The author’s interviews with over a dozen drivers reveal several factors accounting for GSM’s fast expansion in Vietnam. First, GSM treats drivers as employees rather than contractors or partners, as seen on other ride-hailing platforms like Grab. As employees, the drivers are entitled to a fixed monthly salary, performance bonuses and other benefits such as four paid days off per month, health insurance, and social insurance contributions. This not only provides them with a sense of security but also fosters a sense of loyalty towards the company.

Second, while Grab drivers have to make a significant initial investment to purchase their own vehicles before being able to join the platform, XanhSM’s drivers are not burdened with this expense because the vehicles they drive are owned by the company. As a result, many Grab drivers have opted to lease out or sell their cars and switch to driving for XanhSM.

…while Grab drivers have to make a significant initial investment to purchase their own vehicles before being able to join the platform, XanhSM’s drivers are not burdened with this expense because the vehicles they drive are owned by the company.

Third, in terms of operational costs, Grab drivers not only have to cover depreciation costs for their own vehicles but also face high expenses for petrol and maintenance. On the other hand, XanhSM drivers’ main expense is for charging their vehicles, which, according to those interviewed by the author, can be as low as one-third of the cost of petrol for traditional cars. Many drivers who have made the switch from Grab to XanhSM also revealed that in addition to the costly operational expenses, the high commission fee imposed by Grab, which goes up to 25 per cent of their daily earnings, was a major source of frustration that ultimately led them to switch to XanhSM.

XanhSM’s rapid expansion, having served more than 60 million trips since its launch in April 2023, is also a clear indication of the high satisfaction levels of its clients. XanhSM’s increasing popularity is partly due to its fixed fares for trips booked through its app, in contrast to Grab’s fluctuating fares based on demand. With different promotional offers, its fares may also be lower than Grab’s. At the same time, XanhSM’s drivers are perceived as polite and friendly due to the company’s thorough training and its emphasis on service quality. Meanwhile, its cars are big, new, clean and “smart”, making the trips comfortable and enjoyable for clients. Clients also appreciate XanhSM as a green transport solution that helps reduce air pollution, especially in Hanoi and Ho Chi Minh City.

As such, despite its relatively young age, XanhSM is showing promising potential as evidenced by its rapid growth. If the company continues on its current trajectory, it may eventually be able to dethrone Grab in the Vietnamese market. This would be a major achievement for Vingroup and VinFast. Despite selling nearly 35,000 cars globally in 2023, VinFast is still operating at a huge loss. The success of XanhSM would not only bring in a significant stream of revenue for VinFast but also help educate the market about its products, thereby boosting its future sales. Additionally, if XanhSM can expand and eventually go public, Vuong and Vingroup can mobilise additional funding for their other businesses, especially VinFast.

However, despite its initial success, GSM is also facing several significant challenges. Some drivers have expressed concerns over the company’s increasing pressure on its drivers to generate more revenue and imposition of higher bars for performance bonuses. Moreover, driving for GSM is not as flexible as driving for Grab, as drivers do not have the freedom to choose when they want to drive. This lack of flexibility may be a hindrance for some drivers.

In order to expand its business faster, GSM has announced it will soon launch the XanhSM Platform, whereby VinFast EV owners can join the company as partners to provide ride-hailing services. It remains unclear how the company will treat these drivers, but they will most likely be classified as partners rather than employees. As such, while enabling the company to expand faster, this approach may subject the partner drivers to the same problems they face when driving for other platforms like Grab.

GSM’s fast expansion and constant efforts to attract drivers and clients through different promotional offers mean that the company may not be able to generate profits anytime soon. This could potentially jeopardise its growth prospects and even its overall survival, especially if VinFast’s sales fail to improve and Vingroup’s cash cow, its real estate business, encounters difficulties.

GSM’s expansion into international markets may also prove challenging as it will likely face a more adverse regulatory environment in other countries. This is evidenced by its delays in launching services in Cambodia. As such, while GSM may eventually be able to challenge Grab’s dominant position in Vietnam, there is no guarantee that it will replicate its success in other markets.

2024/70