On Friday (Dec 8), Temasek Holdings-owned ComfortDelgro announced that they have poured S$642 million buying over 51% of Lion City Holdings, a car-rental arm in Singapore owning around 14,000 rental cars. The purchase of their competitor means ComfortDelgro paid for over S$91,000 per rental car and, as the majority shareholder of 51%, obtain the right to use Uber app for their ComfortDelgro taxis.
The sale was a great deal for Uber, which managed to offload thousands of it’s depreciating assets and bleeding rental business. According to an investment website, Lion City Holdings have a S$1 billion debt position as of Dec 2016. Fuelling the poor investment decision to spend hundreds of millions buying over competitors is ComfortDelgro’s desperate need to regain it’s status as a taxi monopoly as it enjoyed for decades before the introduction of taxi-sharing app Uber and Grab.
To complete the monopoly, ComfortDelgro will only need to buy over Grab app and inflate taxi prices afterwards. It is currently near-impossible for new taxi-sharing apps to enter the market due to new regulations introduced by the Singapore government in Feb this year.
Currently, ComfortDelgro is seeing increasing rental losses as the number of unhired taxis kept increasing. According to the Land Transport Authority, the total number of unhired taxis hit a record of 9.8% in Aug 2017. In the Q3 result for ComfortDelgro, taxi business revenue declined 11.2%.
Earlier in Feb, ComfortDelgro and other smaller taxi companies applied to use Uber-style “surge” pricing and slashed taxi rental fees to save their declining business. However, the move have little effect as taxi drivers continue to leave to drive for Uber and Grab due to the savings in rental. A ComfortDelgro driver pays rent up to S$110 a day, compared to Uber’s S$38 a day.