Asia’s on-demand startups have raised hundreds of millions of dollars from investors in the past few years to scale and Competition is fierce in ride-sharing, alternative transportation, delivery, and a host of related and unrelated services. Now it’s settled.
This week, Southeast Asian dinner app ride-hailing and food delivery app operators catch More than a thousand layoffs, accounting for about 11% of the total number of employees, are the first large-scale layoffs since 2020.
Grab, which provides services in Singapore, Indonesia, Thailand, Vietnam and Myanmar, said it would pay half a month’s severance pay for every six months of service completed. It will also provide those affected with health insurance until the end of 2023, as well as career transition counselling, among other measures.
The layoffs come about a month after Nasdaq-listed Grab reported that quarterly results This suggests that user growth and user spending are slowing amid continued net losses and slowing user spending co-founder leaves from business.
In a memo to employees, CEO and co-founder Anthony Tan downplayed the move as a purely profitable cost-cutting measure; Resizing in response to changes in technology, capital market conditions and competition.
“We have to adapt to the environment in which we operate,” he said wrote in a letter published online. “Changes have never been faster. Technologies such as generative artificial intelligence are developing at breakneck speed. The cost of capital is rising, directly affecting the competitive landscape.” The group has publicly committed to achieving “group adjusted EBITDA breakeven” by the end of the financial year.
But it has been working toward that goal without slashing spending. Unlike its arch-rivals Sea and GoTo (GoJek’s parent company) in the region, Grab made no layoffs last year.Last September, its chief operating officer Alex Hungate told Reuters Grab doubled down on this commitment despite weak market conditions.
Before this week’s news, Grab last cut jobs in 2020: Job cuts 360 jobs During the outbreak of the new crown pneumonia (COVID-19) pandemic, the business of all ride-hailing companies in the world has fallen off a cliff. AAt the time, these layoffs affected less than 5% of the workforce.
by comparison, go Lay off 600 employees After improving profitability in March this year 1,300 layoffs, or 12% of the workforcesave cash seven months in advance.
While Tan doesn’t want to make profitability a primary goal, the cut could be seen as a response to some bleak metrics in its last earnings report that were reflected elsewhere: The company has been hammered in the market.
When Grab went public via SPAC in December 2021, it had raised more than $10 billion in external funding as a startup from investors including the SoftBank Vision Fund (when its spending spree was at its peak) as well as strategic backers such as Hyundai — Valuation at $40 billion. Today, however, the company’s market cap is between $1.2 and $13 billion.
Another challenge is the continued fierce price competition with competitors, which is not only a promotion for consumers, but also an incentive for drivers.
The third challenge is likely to be business scale. Over the years, Grab has accumulated a large number of services, aiming to create a “super app” that can provide consumers with all services. Most recently, the Singaporean on-demand service company acquired Philippine motorcycle taxi platform Move It in 2022, Malaysian supermarket chain Jaya Grocer in 2021 and Indonesian digital payments platform OVO in 2021.
Grab has not ruled out possible other steps to “adapt” to today’s market, including divestment, cancellation of services or further layoffs.
“The main goal of this exercise is to strategically restructure ourselves so that we can move faster, work smarter, and rebalance resources across our portfolio in line with our long-term strategy,” Tan said.