Ride-hailing Unit of Grab Expected to Reach Pre-Covid Levels by End of 2023

Singapore-based Grab said on Wednesday that its ride-hailing unit is expected to reach pre-Covid levels by the end of this year.

In its second-quarter earnings release, Grab reported that its mobility gross merchandise value (GMV) for the quarter was $1.32 billion, a 28% increase from $1.03 billion in the same period a year ago. Grab also stated that its mobility GMV has recovered to 85% of pre-Covid levels.

“International traveler demand continues to recover. We increased airport rides by 64% year on year to reach 77% of pre-Covid levels,” said COO Alex Hungate during an earnings call on Wednesday.

“Domestic demand also further normalized across our markets with mobility GMV now 85% of pre-Covid levels. When we compare mobility GMV levels between the second quarter of 2023 and the same period in 2019, several of our core markets, such as Malaysia, Singapore, and Thailand, have either reached or exceeded these levels,” added Hungate.

Pandemic lockdowns and restrictions had a negative impact on Grab’s ride-hailing business. In the third quarter of 2021, its mobility business fell behind its deliveries unit, with a 26% year-over-year decrease in revenue ($88 million). However, Singapore lifted most of its Covid-19 restrictions in April 2022 and all remaining pandemic-era border measures in February this year.

Grab’s CFO, Peter Oey, mentioned that the company has seen increased traffic as people return to offices and resume travel.

“We remain on track to exit 2023 at pre-Covid GMV levels,” Oey stated during Grab’s earnings call on Wednesday.

In addition, Grab resumed its car-pooling service, GrabShare, at the start of 2023 after suspending it during the pandemic.

“GMV growth was attributed to the growth in mobility and deliveries GMV, and group monthly transacting users,” noted Sachin Mittal, head of telecom, media, and technology research at DBS Bank.

The deliveries GMV also saw a 4% year-on-year growth due to an expanding subscriber base for GrabUnlimited, a monthly subscription plan that offers users discounts and deals.

DBS Bank stated that Grab is fully valued and does not anticipate a significant margin increase in the long term.

Regarding driver supply levels, Grab’s Hungate mentioned that they are currently at 84% of pre-Covid levels, and the company will continue to focus on improving driver supply. Singapore has faced a shortage of drivers since the pandemic, resulting in higher fares and longer waiting times.

In July, Grab announced its acquisition of Trans-cab, Singapore’s third-largest taxi operator, to grow its driver base and digitize its fleet operations. The deal is expected to be completed by the fourth quarter.

“The company flexed its competitive strength this quarter by acquiring Trans-cab. We believe the acquisition provides inroads to car leasing and expands the fleet for Grab, which should further bolster its mobility services in Singapore,” said Kai Wang, senior equity analyst at Morningstar Asia.

Grab posted revenue and net loss figures that surpassed estimates. Revenue for the second quarter was $567 million, up 77% from a year ago. Its net loss was $135 million, a 75.3% improvement from the $547 million logged in the second quarter of 2022.

Grab’s U.S.-listed shares closed 10.78% higher on Wednesday.

“Overall, it is quite a positive set of numbers,” said Jonathan Woo, senior research analyst at Phillip Securities Research.

“At least there is some end in sight for profitability. We think that Grab could turn a net profit as soon as early 2025 if costs continue to improve,” added Woo.

Grab announced that it is now aiming to break even in the third quarter, advancing its previous target of the fourth quarter. For 2023, Grab expects revenue between $2.2 billion and $2.3 billion.

In response to macroeconomic headwinds, Grab has implemented cost-cutting measures such as reducing customer incentives, discretionary spending, and conducting mass layoffs. Other regional tech giants like Sea and GoTo have also taken similar cost-saving actions.

In June, Grab announced the layoff of over 1,000 employees to adapt to the challenging environment and higher cost of capital. This was the company’s largest round of layoffs since 2020.