The two major players in Indonesia’s ride-hailing industry, homegrown Go-Jek and Singapore-based Grab, have each raised hundreds of millions of dollars from investors and spent millions of dollars discounting their services to gain ground in the hard-fought battle for users (much to the delight of those users and their wallets).
But according to the country’s transportation minister, the days of discounted rides may be over very soon as his office is preparing to issue new regulations that would ban companies from discounting their fares as a means of making the industry more sustainable.
“We have drafted a Permen (Ministerial Regulation) or circular that prohibits these discounts because while they may give a temporary benefit, in the long term [it will lead to the industry killing itself], and we do not want that happen,” Transport Minister Budi Karya explained yesterday as quoted by Detik,
The Transportation Ministry had previously discussed setting “limits” on discounts, arguing that they amounted to an unfair competitive advantage for established companies with deep pockets (ie Go-Jek and Grab) that would make it extremely difficult for new, smaller companies to enter the market, leading to monopolies.
Transport officials said the new regulations will also lower the minimum rates for online motorcycle taxi rides, mostly over short distances, although the full details of exactly what that entails have not yet been revealed.
According to Budi, the new regulations will be drafted and signed within the next 1-2 weeks and would likely go into effect by the beginning of July.
In a statement to the media, a representative of Grab said they would, of course, comply with whatever regulations were put forth by the Transport Ministry, but cautioned officials to consider the effects that banning discounts would have on consumers.
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