An undated photo of a Vinasun taxi picking a passenger in Ho Chi Minh City. Photo: Dinh Quan/Thanh Nien
Vinasun, the biggest taxi company in Vietnam, expects its net profit to fall 20 percent to VND264 billion (US$11.68 million) this year, citing high costs and harsh competition with ride-hailing services Grab and Uber, local media reported on Friday.
The company saw a 5 percent profit increase last year, compare to 40 percent in 2014.
Its profit in the first quarter this year was more than 73 percent short of its target, even though the first three months of the year with major holidays are often the peak season of the taxi industry, news website VnExpress reported.
Vinasun has been one of the most vocal critics of the two foreign competitors.
The arrival of the Malaysian-owned startup GrabTaxi, now simply known as Grab, and the US-based service Uber at the end of 2014 has adversely affected Vinasun's business, board chairman Dang Phuoc Thanh was quoted as saying at the company's shareholders meeting that same day.
The foreign companies do not have to pay taxes and invest in their fleets, while Vinasun has to pay VND18-20 billion ($796,000-885,000) in taxes a year besides huge expenses on vehicle maintenance and upgrade, Thanh said.
"We have been under huge pressures," he told the shareholders.
In efforts to increase its competitiveness, Vinasun plans to reduce fare rates to an average of VND15,000 per kilometer this year, from VND16,000 at the moment. It will also add at least 1,150 new taxis to raise its fleet to 6,441 cars, besides easing payment through cards and mobile apps.
Taxi companies across the world have been trying to fight back the rise of ride-hailing services such as Uber and Grab.
In Vietnam, the foreign companies have consistently been questioned about their legality. At times it is even difficult to know which side the government is on and whether the future of Uber and Grab in the country has been secured.
Vinasun has more than once asked local authorities to ban the apps, saying they are illegal and they are competing with local businesses "unhealthily."
It has also prohibited its drivers from using the apps to pick up passengers and launched its own cab-hailing app.