Toyota pumps record $1.3b into Grab
Experts say deal is a win-win situation and an alliance for the future
Singapore-based ride-hailing firm Grab will receive a billion-dollar shot in the arm from car-maker Toyota in what is shaping up to be a pitched battle with incoming competitor Go-Jek.
The companies said yesterday that Toyota will lead Grab's latest round of funding, investing US$1 billion (S$1.3 billion) in what is the biggest bet by an automobile manufacturer in the ride-hailing sector globally.
The investment puts Grab's valuation at just over US$10 billion, Bloomberg reported, and experts said this deal could be an alliance for the future.
The deal will see Toyota and Grab strengthen and expand an existing partnership in the area of connected cars, and drive the adoption of new mobility solutions in South-east Asia, Grab said in a press release.
The companies have been working together since last August, with Grab installing recorders developed by Toyota to collect driving data from 100 of its rental cars.
The two have also collaborated to provide driving-data-based car insurance for Grab's rental fleet here through local insurance companies.
The fresh round of funding will help Grab expand services such as GrabFood and e-payment service GrabPay.
Delivery service GrabFood was rolled out here last month. It is also available in Malaysia, the Philippines and Thailand.
Other services like financing programmes and maintenance could now be in the pipeline.
For Toyota, investing in Grab is a hedge for the future, analysts said.
"If you think about all the increased car-sharing that we have... It may dampen some of the future demand for cars," said Singapore Management University's Assistant Professor Terence Fan.
"So in this way, the car manufacturers are trying to find ways to compensate for a little bit of their lost revenues going forward," he added.
Singapore University of Social Sciences transport economist Walter Theseira agreed.
He said: "If you (car makers) don't own these firms which sell the mobility services and you rely on your old business model of selling cars directly to consumers, what happens when you wake up 20 years in the future and most people buy mobility services and individuals don't buy cars anymore?
"Now, it seems like a lot of money, but in the context of a major car manufacturer, it is a relatively small amount for them to hedge against this future."
For Grab, the investment will replenish its war chest ahead of Go-Jek's arrival.
The Indonesian company announced plans last month to invest US$500 million to enter four South-east Asian markets, including Singapore.
Dr Theseira said: "(Grab) spent quite a bit of money fighting off Uber and now, given that Go-Jek is moving into the same market, they obviously foresee that without fresh funding, they might have some difficulty competing."
While Grab was unwilling to disclose details of the new funding round, a spokesman said the company was "thrilled" by Toyota's latest move.
The spokesman told The New Paper: "We are not disclosing our other investors at this point but are excited by the quality of investors who are interested in partnering with Grab in this Series H funding round."
Toyota is worth north of US$200 billion. As part of the deal, it joins other companies such as SoftBank and DiDi as a key strategic investor and will take a seat on Grab's board.
"It is a win-win situation where Toyota can move potentially into new arenas... And at the same time Grab can get access to new capital," said Associate Professor Lawrence Loh of the National University of Singapore Business School.
"I think in this case, it is not just a pure investment where you want to just generate financial returns. It is a real business collaboration where both parties want to enhance their business interests."
This is not the first time manufacturers and ride-hailing firms have come together.
Grab previously inked deals with Honda and Hyundai, while Toyota had announced a partnership with Uber in 2016.