A full tank for e-hailing

MALAYSIA’S Budi95 fuel subsidy scheme for e-hailing drivers represents a strategic intervention in the sector by providing mileage-based fuel quotas to full-time drivers.

The scheme partly helps stabilise driver incomes amid rising fuel prices and the possible withdrawal of other subsidies.

It also benefits segments of the wider society that depend on the sector’s services.

For e-hailing platforms like Grab, Putrajaya’s fuel scheme helps maintain competitive fares and stable transaction volumes.

In some ways, the fuel scheme also supports the 35%, or RM4bil, in revenue the company derives from its Malaysian operations.

However, with fuel price pressures likely to persist over the next few months, the fiscal strain on the government’s budget will only increase.

With three million e-hailing drivers in the country, industry participants represent a voting block that the government of the day likely does not want to alienate.

Hence, the subsidy scheme will continue despite the fiscal burden it imposes.

Another option the government could consider is what the Indonesian government has done in response to such pressures.

Jakarta has cut the commission rate that e-hailing platforms earn from an average of 20% to 25% of fares to 8%, ensuring that the seven million riders involved in the sector take home a bigger share of total fares.

Its sovereign wealth fund, Danantara, has also taken a minority stake in local e-hailing company GoTo – the parent company of ride-hailing firm Gojek and eCommerce platform Tokopedia – to gain better understanding and influence over how e-hailing companies are run.

All of these measures across the region, however, may only serve as short-term solutions, as the sector faces the possibility of major disruption.

With technology evolving at a rapid pace and the era of driverless technology drawing closer by the day, the job security of many in the e-hailing industry remains uncertain.