Due to the wave of technology that Uber and Grab brought into Vietnam, FUTA Bus Lines – Phuong Trang Inc (FUTA) decided to pour VND2.2 trillion (roughly $100 million) in a future ecosystem.
Tran Thanh Nam, founder of car booking app Vivu revealed that this app has just been acquired by FUTA and renamed to VATO. VATO was expected to be launched in this May.
However, the thing that Uber Technologies Inc. agreed to sell its Southeast Asian operations to regional-rival Grab caused VATO to be launched in April, one month earlier compared to the schedule.
VATO is introduced shortly after Uber’s withdraw in part to lure drivers who used to work for Uber.
The amount of $100 million will be invested to create an ambitious ecosystem of FUTA, Nam shared. “FUTA’s ecosystem will consist of not only a car-booking app but also many areas to make use of the advantages of this enterprise."
Specifically, Vivu which has been operating for some time and renamed VATO will be given priority. With the additional capital funded by FUTA, VATO will focus on two key markets, Ho Chi Minh City and Hanoi. Currently, users can find cars on the VATO. Previously, this app operated in niche markets which are outlying provinces.
Despite timely launching of VATO, Nam also acknowledged the huge competitive pressure from other rivals. At present, Grab’s scale after the acquisition of Uber Vietnam can reach up to 30,000-40,000 vehicles, larger than any taxi companies in the country. To spend on promotional activities to develop market share, Grab Vietnam was willing to accumulated losses to VND938 billion ($41.23) in the first four years of operation.
The pressure from Grab not only resulted in Uber’s withdrawn from Vietnam but also the misery to the domestic taxi companies. Vinasun and Mai Linh, the two largest taxi companies in Vietnam, in recent years have narrowed their fleets and are constantly complaining about Grab’s unfair competition.
However, the founder of VATO believed the Vietnamese app can still be competitive by satisfying the requirements of customers that other transportation apps failed to do.
"For instance, VATO offers more travel options. VATO users can select multiple destinations in succession instead of two pick-up and drop-off locations. In addition, VATO provides bargaining feature for short distance trips which are often unattractive to drivers so that users and drivers can negotiate prices with each other," Nam said.
Another feature is that VATO will support users connecting to the traditional taxi system such as Mai Linh and Vinasun other than establishing its own fleet in such way Uber and Grab did. VATO is aimed to function as an e-commerce platform, connecting users with drivers.
Nguyen Tri Dung, CEO of FUTA stated that FUTA has long cherished to create a product made in Vietnam; therefore, FUTA has decided to invest in VATO. The $100-million investment capital is actually not a huge amount.
Established in 2002, FUTA is one of the largest passenger transport companies in Vietnam, serving more than 20 million passengers a year and operating mainly in the south. FUTA is also trading in taxi business which is ineffective.
Investment in technology is considered a venture capital because successful technology would change a whole industry, but it is costly, time-consuming, and risky. Uber - a startup which was poured tens of billions of dollars, also inevitably failed to enter many markets, including Vietnam.
Therefore, the fact that a domestic enterprise is willing to invest a large amount in technology is considered a positive signal, indicating that Vietnamese enterprises are gradually catching up with global trends.
The car booking market at first will definitely become more attractive thanks to the participation of newbie VATO. To attract users and drivers, VATO is preparing resources for promotion. Expected, this app will need about VND100 billion ($4.4 million) in the first year.
VATO currently offer the price at VND8,500 ($0.37) per kilometer, similar to that of GrabCar. the discount, however, is 20 per cent, lower than the current 25 per cent of Grab. Currently, there are about 2,000 vehicles registered of which 500 vehicles are in operation.
"If this app satisfies users’ requirements, I hope Vietnamese people will support the product made in Vietnam," said Nam.
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