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Here’s What Comfortdelgro Corporation Ltd Said About The Potential Uber Disruption

Comfortdelgro Corporation Ltd (SGX: C52) is facing compeitition in its business.

Ride-hailing apps, such as Uber, are making inroads into the company’s taxi business. As my colleague Stanley Lim opined recently, Uber is able to offer competitive vehicle rental rates for drivers and subsequently lower ride costs for customers. This could be a threat that Comfortdelgro cannot ignore.

To Comfortdelgro’s credit, the company had discussed disruptive threats to its businesses in its latest annual report. Here’re a few snippets which may interest investors:

“The Third-Party Taxi Booking Service Providers Act was passed in Parliament in May 2015. Under the Act, these service providers can only operate with licensed taxis and drivers with vocational licences.

The presence of disruptive technology in the taxi business has caused some uncertainty in the market. But the effective enforcement of the Third-Party Taxi Booking Service Providers Act will provide a fair level playing field for the traditional taxi operators.

Our call centre and call booking apps have been constantly upgraded to ensure that we remain competitive. Thus far, we have managed to hold our own in this regard”

Lim Jit Poh, Comfortdelgro’s chairman, included the statements above as part of his Chairman’s Statement. He believes that the latest regulations on ride-hailing apps is a positive development for his company. Furthermore, Lim noted that Comfortdelgro is still the leader in the taxi business:

“We continued to be the leader in the taxi business. We increased our fleet size to 16,997 as at December 2015, occupying 62.1% of the market share with practically all our vehicles hired out. This is indeed admirable in a very challenging environment.”

Being a leader is not an invitation to keep expanding Comfortdelgro’s taxi fleet, though. Lim had expressed some caution, noting that the taxi population in Singapore is extremely high.

That said, the work is not done yet for Comfortdelgro. It has been working hard to improve its mobile offerings, call centres, and payments systems. Here’s  what the company had to say on the subject in the latest annual report:

“In 2015, over 70% of our taxi drivers received at least one five-star rating. Since the ComfortDelGro booking app was launched in 2010, it has been downloaded 3.18 million times…

…For the year in review, ComfortDelGro Taxis catered a total of 34.1 million booking jobs – of which more than half were conducted through the app.”

In another portion of his Chairman’s Statement, Lim also noted that “the number of successful call centre bookings continued to be high with an automation rate of 90%.” Meanwhile, Comfortdelgro is working to improve cashless transactions in its business. The company expects usage of cashless transactions to increase.

Yet, apart from the competition posed by ride-hailing apps, new challenges and changes may occur in the future. Lim noted:

“We will be watching very closely the development of electric, hybrid and autonomous vehicles.

The intensification of disruptive technologies is another area that we are keeping a keen eye on. We have, and will continue to invest and roll out new services to keep demand strong for our drivers. We are also watching travel patterns of commuters as more rail lines are rolled out in Singapore.”

Investors may want to continue observing consumers’ adoption of ride-hailing apps as well as Comfortdelgro’s response to the threat. As Lim had shared, Comfortdelgro has been able to hold its own, thus far. The last two words could be the most important to keep in mind for the long haul.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.