By Fransiska Nangoy and Cindy Silviana
JAKARTA (Reuters) - Thousands of Indonesian taxi drivers will take to the streets of the capital on Tuesday for a protest rally to demand the government prohibits ride-hailing apps like Grab and Uber, as a price war intensifies.
The proliferation of cheap taxis using ride-sharing apps Go-Jek, Grab and Uber has made the traditional pick-up and drop-off taxi services unprofitable, threatening the business models of the country's top taxi firms PT Blue Bird and Express Transindo Utama.
"Online transport apps have destroyed some local taxis, mainly the small players," said Andre Djokosoetono, director of Blue Bird, the country's largest taxi operator.
"We are fighting to make sure everyone is treated fairly and there aren't any players disadvantaged by these apps."
The Transportation Ministry has asked that the taxi-hailing apps be banned since they are not registered as public transport.
But the Communications Ministry, which oversees the app operators, has said the firms can go on operating.
Nasihin, a taxi driver for Express, said he used to earn about 250,000 rupiah ($20) a day in salary before the arrival of the ride-hailing apps.
Now he struggles to bring home a steady income.
"Tomorrow, I have to go to the protest because what they are doing is illegal," he said.
"Taxi drivers are getting very angry."
The mobile apps have shaken up the market, sparking a cut-throat price war and forcing diversification away from unprofitable taxis into motorcycle taxis.
Go-Jek and Grab drivers say they regularly offer rides at below cost to grab market share. The two privately held companies declined to provide details on pricing and their financial performances.
"A price war is not unusual for the introduction of a businesses like this ... as promotions are huge to seize market share," said Patrick Walujo, co-founder of private equity firm Northstar Group, one of three investment companies that have together provided more than $200 million in funding to Go-Jek.
"Perhaps Grab is hoping it can squeeze us. The reality is that because we offer multiple services and products our drivers generate more revenues, and our investors understand that."
Both Go-Jek and Grab offer cheap motorbike taxi services.
Go-Jek has capped the cost of a motorbike ride at 15,000 rupiah ($1.15) anywhere in Jakarta. Last week, Grab gave first-time users up to 20 free rides.
Both firms say they have the biggest share of the motorcycle taxi business in the city of about 10 million people.
"This is a growth stage where we really focus on expanding the market by investing to reach a large number of customers, so we can get large volumes," Grab's managing director Ridzki Kramadibrata told Reuters.
(Additional reporting by Yuddy Cahya; Writing by Randy Fabi; Editing by Robert Birsel)