Battle royale for Indonesia, experts predict

  • US$1.5bil to US$2bil investment in ride hailing just for 2016
  • Could Go-Jek emerge as king maker when competitive dust settles?

Battle royale for Indonesia, experts predict  

EXPECT a battle royale for Indonesia’s lucrative ride hailing market, say the experts. With the recent US$750 million funding, Grab has made no secret of its ambition to conquer Indonesia, home of 250 million people, with a potential market value of US$15 billion just for ride hailing.
However the journey will not be easy, since two other players, sector pioneer Uber and local champion Go-Jek are also focusing to win the Indonesian market.
“Yes, I believe Grab can win Jakarta, but by the same token, Go-Jek can also do the same. It is really too early to tell who will ultimately be the winner of Jakarta and greater Indonesia,” said Golden Gate Ventures principal Justin Hall to Digital News Asia (DNA).
While it is too early to pick a winner, it is clear that each of the three is not shy of investing big with Monk’s Hill Ventures partner, Peng T. Ong predicting that the committed investment for ride-hailing market in Indonesia will be around US$1.5 billion to US$2 billion from the three players for this year alone.
Hall notes that Grab’s move to focus on Indonesia is a natural one since the country is key to winning the South-East Asian (SEA) market.
“You cannot look at SEA as a market without strongly considering Indonesia and how it fits into the strategic vision of a company that publicly hails itself as the Uber of the region,” he adds.
For Grab, Indonesia is a fight to win before it can realise its title as regional king.
“If Grab was still in its early days, focusing on one or two smaller markets made sense, and that is precisely what it did. It originated from Malaysia, and then expanded into Singapore, and then from there, regionally.
“But now, Grab has raised too much money to focus on any one market; it needs to dominate SEA,” Hall added.
M&A scenario
While Grab needs to dominate SEA, one competitor it faces in Indonesia, Go-Jek, just wants to dominate its home market and has recently been buffed up with a hefty US$550 million war chest of its own.
“Go-Jek will definitely continue its focus in the country,” says Ong. “And Uber just left China, so next big market they will focus on will definitely be Indonesia. So these three will battle their money out of one market,” he adds.
[Para edited for accuracy: An earlier version incorrectly mentioned Uber as exiting India.]
One scenario in this battle is that, weary, bloody and battered from their head on competition, they come to their senses and angle to create a merger that kills of one player.
Ong agrees that a merger and acquisition (M&A) or some kind of collaboration between the players might likely be the eventual scenario.
“That is what happened in China with Didi and Kuaidi first, and the recent one, Uber. Rather than fight and let the bloodbath continue, just buy and be the biggest of all,” he says.
But whether the collaboration or M&A scenario will happen in Indonesia, depends on each company’s ego.
“Will an M&A be difficult? Yes. There are many international stakeholders in the three players, but will it help Grab to win Indonesia? Yes,” Ong predicts.
Hall however considers an M&A unlikely – even though his firm produced The Bamboo Report early this year that showed M&A to be the more common path for startups in the region to exit.
The report highlighted that there have been only 11 tech IPOs in SEA since 2005, while there have been 145% more M&A in the same period with a predicted 500% increase in the M&A by 2020.

His rationale is simple. “Indonesia is large enough that Go-Jek can easily ‘win’ that market and be a global behemoth as a result.”
He also points to another distinction. “Whereas Grab positions itself as almost entirely transport, Go-Jek is trying to position itself as a platform, capable of storing value in wallets, courier documents, being the last-mile for logistics, etc. Grab and Uber are direct competitors, but Go-Jek sees transport as just one component of a very, very sticky service and value,” he explains.
Market big enough for all three?
Meanwhile, seasoned entrepreneur and angel investor Shinta Dhanuwardoyo takes a slightly different view, that Indonesia’s market is big enough to accommodate competition from Grab, Go-Jek and Uber.
“The possibility is always there, with each player having a different positioning. And to think of Go-Jek as a local champion that collaborates with Grab – why not?” she tells DNA.
“SEA is a powerful market after all, and winning Indonesia will be the key, I would love to see Go-Jek as the local champion leading any collaboration in Indonesia in order to be a bigger SEA player,” she adds.
For Shinta, consumers will dictate which player can be the winner.
“Everyone can win still, especially the one that consistently listens to the customers’ need and wants, and keeps improving their offerings.”
Looking at the bigger picture, Ong sees Indonesia as the winner.
“When we see it [the competition] clearly, it is actually a great win for Indonesia, be it the country and its citizens. Why? Because these are players that keep pumping in money to the country and help modernise the transportation system,” he explains.
“In the end no matter how hard the competition is for the players, the consumer wins, the country wins; transportation costs become lower, there are choices,” he adds.
In view of this, what the country needs to do is to keep encouraging and facilitating international players to come and compete in the market, says Ong.
Related Stories:
Week in Review: Go-Jek’s US$550mil funding sparks intriguing scenarios

Week in Review: “Anything is possible” says Grab’s Anthony Tan on an IPO
Go-Jek’s US$550mil funding a game-changer for Indonesia
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