Why Hyundai's Grab tie-up gives both new direction

While the Korean auto giant wants a slice of the sharing economy, fast-growing Grab wants its green know-how as it expands its range of services

Globally, the mobility market – basically, getting people from A to Z over land – is worth a staggering $7 trillion, according to Goldman Sachs. And it's being disrupted like few other sectors, as tech titans and ambitious start-ups vie to harness new technologies in fields such as connectivity, electric cars, autonomous driving and the sharing economy.

Traditional automakers have moved to carve out their slice of this booming sector via partnerships and investments. The latest such deal, announced on Thursday, sees a traditional titan of North Asia's motor industry, Hyundai, make a strategic investment in Southeast Asia’s hot ride-hailing hopeful, Grab.

For Hyundai, it's an opportunity to seize a foothold in the booming sharing economy and, according to the announcement, a way to enhance its capability to lead future mobility in Southeast Asia, home to 650 million people.

For Grab, it's the latest in a series of investment deals with leading regional automakers, after Japan's Toyota and Honda. Key to the appeal of this transaction is a chance to burnish its green credentials, utilising Hyundai's eco-friendly models in a new mobility services platform as it seeks to offer more options for its users.

“Grab’s model will always be around forming the right partnerships to explore new mobility options. Today, Grab has the largest fleet of electric vehicles in Singapore, which makes Hyundai, with its track record of leadership in eco-friendly vehicles, a natural partner for us,” Grab's president, Ming Maa, told FinanceAsia by email on Thursday.

Grab will offer its users a new mobility service platform that will utilize Hyundai’s eco-friendly models such as the IONIQ Electric as part of the partnership.

“Hyundai’s strategic investment in Grab marks the beginning of an exciting new partnership between the two parties, bringing Hyundai one step closer to realising its vision for future mobility,” Dr Young Cho Chi, chief innovation officer at Hyundai, said in the announcement.

Financial terms of the transaction were not disclosed, but it is part of Grab’s Series G financing round, in which investors including Didi Chuxing, SoftBank and Toyota Motor invested $2.5 billion in the start-up.

“We are also thinking about better transport integration. By going multi-modal – all within the Grab app – and looking into different modes of transport, we are using technology to bring down costs of living and make commuting faster and cheaper,” Maa said.

He shared an example of what might be possible: If you're travelling from the outskirts of a city to the centre, you might book your bike to the bus stop, your shuttle bus from there to the office or a car for when you get off the train, all with a single tap in the app.

In 2017, Grab launched four new transport services, GrabCoach, GrabShuttle, JustGrab and GrabNow. According to Maa, “a number of very exciting projects” are in the pipeline, which means more transport services and features for the Grab platform to serve various needs and preferences and cater to every level of the income pyramid. He declined to go into detail of new products.

Besides investing in on-demand transportation, Grab will use the money raised in the latest round in developing and expanding its mobile payment platform, GrabPay, as well as other commerce services, according to Maa.

In the meantime, the company is “always on the look-out” for strategic investment opportunities in Southeast Asian firms which have great technologies and share its vision to drive the region forward, said Maa. Last year, it bought up Indonesian start-up Kudo to boost its nascent mobile payments platform.

Shared mobility

He added that ride-hailing was in turn key for new mobility technologies to scale, making Grab a strong partner for Hyundai to provide its services and technology.  According to the ride-hailing company, it has now a fleet comprising more than 2.3 million drivers, and offers private car ride, motorbike, taxi, and car-pooling services across eight countries and 168 cities in Southeast Asia. It provides 3.5 million journeys a day.

The deal falls hot on the heels of a series of such tie-ups in recent years, as carmakers including Volkswagen, Toyota and General Motors also invested in ride-sharing companies as they look for new growth areas, with consumers moving away from the conventional private vehicle ownership.

Such alliances also help them to scale up their new models fast, while hedging against changing consumer appetite. Through 2030, roughly a third of the expected increase in vehicle sales from urbanization and macroeconomic growth will likely not happen because of shared mobility, according to consultancy McKinsey & Company.

Hyundai in January last year launched a car-sharing programme in the US, in a partnership with WaiveCar, a start-up offering ad-supported car sharing , using the IONIQ Electric model.

China and the US now represent the two largest markets for shared mobility, at $24 billion and $23 billion, respectively. But Southeast Asia’s ridesharing market is set to grow from $2.5 billion in 2015 to $13 billion by 2025, according to a report by Singapore sovereign wealth fund Temasek and Google.

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