Thuy Chi Nguyen says that her motorbike, a 20-year-old Honda Dream balanced on a kickstand beside her, is her best friend. Nguyen, in her late 50s with a ready smile, has been driving a xe ôm moto taxi in Hanoi for 17 years; today, she rarely has a passenger whom she doesn’t already know.
“Most of my customers, like me, live in this alleyway,” she says, sitting on a low blue stool at a tea stand in Hanoi’s Old Quarter. “Some work in banks, and they don’t have time to pick their kids up, so I do it. Others are elderly or blind, and they need someone to take them around. If anyone needs to carry their food from the market, they’ll call me, and I’ll go and collect it.”
There are around 10,000 xe ôm drivers still working in Hanoi. Most are male, in their 50s, and have little formal education. Few regularly use smartphones. “They hurt my eyes,” Nguyen says. “My eyes are old women’s eyes!”
But even in rapidly digitizing Vietnam, which has emerged as the most recent battleground for Southeast Asia’s ride-hailing and food-delivery giants Grab and Gojek, the xe ôm drivers are proving unusually resilient. The almost familial relationships that xe ôm drivers have built within their communities are practically impossible to replicate through a one-size-fits-all technology platform, demonstrating the difficulties that venture-backed unicorns face as they try to build regional businesses.
“Southeast Asia is arguably the hardest place in the world to start a business, because every country has a different culture,” Andrew Duck, an angel investor says. “It’s so diverse. It’s hard to take business models that were successful in other Southeast Asian countries and transport them into any other Southeast Asian country.”
Before the novel coronavirus pandemic, Vietnam’s gross domestic product had been growing at more than 5% annually since the turn of the millennium. Rising disposable income, an urbanizing society, and a tentative opening up of the economy to foreign capital has drawn the attention of international tech companies and investors looking to replicate their successes in Indonesia. Ride hailing has become a particularly competitive space. Singapore-based Grab, Southeast Asia’s first decacorn, and its Indonesian rival Gojek are joined by South Korea’s Baemin and homegrown companies FastGo and BE Group JSC.
These international groups’ financial firepower would seem to give them an irresistible advantage. But they have found Vietnam challenging, due to a combination of entrenched interests, regulation, and cultural resistance.
In 2018, a local taxi firm sued Grab for loss of profits, leaving the unicorn $200,000 poorer and prompting the government to tighten regulations to force private-hire vehicles to operate more like traditional taxis — down to the light boxes on their roofs — and to share passenger data with authorities.
Duck believes that Vietnam is the most entrepreneurial country in Southeast Asia, where most people grow up in homes above shops and everyone has a family member who runs a business. This has meant that for every Grab and Gojek, there are a handful of homegrown alternatives willing to fight for their slice of the market.
“Startup founders look at Vietnam as this giant untapped market, but there’s a reason that it’s untapped,” he says. “It might not be because you’re the first guy there; it might be because the market is littered with the dead bodies of many who have tried to stand before you.”
In an interview with Vietnam Economic Times, Jerry Lim, country head of Grab in Vietnam, complained that the existing taxi players were holding back innovation. “The current challenge digital players face is the immense pressure that traditional players are applying on tech companies and talent who truly want to improve people’s lives using technological innovation,” he told the magazine. … “The industry should not succumb to protectionist policies advocated by the taxi industry.”
Grab knows the Southeast Asia market. When Uber offered would-be Kuala Lumpur users ice cream for signing up, Grab offered durian, a popular fruit in Southeast Asia. But in Vietnam they face competition from local players, who know the market better — so they’re turning to heavy discounts. The platforms’ constant undercutting of one another leaves users flipping between apps, trying to find the best deal. Xe ôms charge 30 cents (7,000 dong) per kilometer compared to Grab’s 22 cents (5,000 dong).
But while ride-hailing companies might be able to make the case to regulators that they are breathing life into a moribund sector in need of modernization, they may find cultural barriers harder to overcome. Many consumers in Vietnam prize the personal relationships they have built with their xe ôm drivers and are unlikely to sacrifice those for anonymous reviews on smartphone screens and impersonal conversations with customer service centers.
“When Grab and Gojek expanded from nothing to everything in the matter of a few years, those relationships became commodified, they became impersonal. Every Grab ride was with someone new,” says Onat Kibaroğlu, a Ph.D. candidate at the National University of Singapore who researches the ride-hailing industry. “The rudimentary business model is the same, but there is no intermediary. Now you have a third party that matches you up with an algorithm and gives you a cheaper price. The business model from afar seems the same, but it’s actually completely different.”
Nguyen, the xe ôm driver, is not worried for her business. “No, not at all,” she says, as she waits to take her next passenger to the bus station. “All of my clients know me. They’ve got my number, and anywhere they want to go, they just call me.”