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CNBC Transcript: Noni Purnomo, President Director and CEO, Blue Bird

Below is the transcript of the CNBC Exclusive interview with Noni Purnomo, President Director and CEO, Blue Bird. The interview will play out in CNBC's latest episode of Managing Asia on 21 February 2020, 6.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.

Christine Tan (CT): Bluebird has always been an innovator in Indonesia's transportation market. With your taxis, you were the best to operate me metered taxies and then you were among the first to enable you drivers with GPS. Why is technology important to you?

Noni Purnomo (NP): Technology is very important for us for many different reasons, because I think what is most important for us, because we own our assets. So, it is very important for us to be able to operate our assets in the most efficient and productive way. With the number of assets we have, we do need technology to help, because when we only had one hundred (cars), we could remember all - the car, the driver, we can match them. But with so many now, we do need technology to help us. And advancement of technology lately really helps us and make sure that we are more efficient and more productive. It is very important for us that the productivity of each car, that means the number of kilometers with passengers on the meter, is good enough, so that it's very productive. For that, we need to be able to use technology including the heat map.

CT: So, you really want to hit full maximization, full utilization?

NP: Yes. We have to. I don't think this is a matter of want or not want anymore. We really need to take full advancement of technology at this moment.

CT: So, you've move into electric vehicles, buying them from BYD and Tesla. Is it all part of your technology transformation?

NP: It is part of our sustainability transformation because we want to contribute positively to the environment. That's why when President Jokowi initiated the idea to have zero emission transportation, we were the first to pick that up.

CT: When you listed the company in late 2014, the company your grandmother founded was riding high. Then came the onslaught of ride-hailing giants - Grab, Uber, Gojek - competition which almost wiped out 80 percent of the company's market value from its peak. Did you ever imagine it would have such a big impact on the company?

NP: We didn't imagine that it would impact that badly in such a short time.

CT: What went through your mind?

NP: What happened in 2016, basically March 2016…It was on our radar in a way, because Uber started in the US. But on the other side, we thought that the Indonesian market was not ready for this kind of technology because we did launch a taxi mobile application in 2011 but it didn't pick up. So, that's the lesson learnt for us. You know, sometimes being a pioneer and innovator in something, it doesn't mean that you would be the most successful because there are so many other variables to it. What happened then, the network, the infrastructure was still GSM, so it was still so slow to download. That was why the market didn't pick it up. So, what we missed out at that time was the trajectory of the technology in the network itself. Because we've been around for 47 years, we have to take care of two parts right: the new innovation and how do we take care of the old technology? Because we do have to take care of both. One of the challenges is about timing as well. When are we going to change completely this old system and invest heavily on this new system? I think it is one of the challenges.

CT: You say that the biggest challenge came not from the technology itself, but from the price competition, and because you are governed by regulations, it meant you really couldn't enter the price war. Just how frustrated were you at that time that you couldn't fight back? Did you lose a lot of drivers in the process?

NP: Well, we lost a lot of customers because of that, because it was something new, something exciting for the customers. You're right - the price subsidy, the price dumping really hit us badly during that time. We also lost a lot of drivers during 2016, especially. But after two years now, starting 2018, we've started to have our drivers coming back to us. I think maintenance started to hit because when they were our drivers, we took care of everything. We took care of the maintenance. We took care of their health, including their family, their children. We gave scholarships

CT: They were missing all that?

Noni: So, they started to miss all of that, especially after two years, because that was when the maintenance start hitting. In the first two years, maintenance was still covered by the dealers and things like that. But after two years, it's your own costs. So, I think that was when our drivers started to come back. So, since 2018, we've started to see the pendulum starting to stabilize a little bit. But still, the biggest issue we are facing up to this moment is the price subsidy. But again, we strongly believe that we focus on our strength, which is the quality of our drivers, the quality of our cars, the cleanliness, the safety part. We really focus on that and that costs money.

CT: Still, you've been lobbying the Government for more level playing field?

NP: A level playing field is very important because what is important as a public transport? We are being governed by the Government, not just the pricing part, but what is also important - and I think the government should not remove – is the safety part. That's why every single vehicle has to be inspected. That's why we need to prove that we have really reliable maintenance facilities because it is all for the safety of the passengers. The pricing part - I think we all need to talk together and see how we can improve and adjust. So, that's why now for us what is important is we want to be agnostic. We need to focus on giving safe and comfortable transportation services to our customers, and our customers can choose whether they want to use our own or hail on the street. It's just multi channels, multiplatform and multi payment as well.

CT: So, you need to give them a reason why they have to pay a premium for you?

NP: Well, it's not really a premium. It's the right pricing. It's not a premium. So, it really depends on how you see it.

CT: How you look at it?

NP: Yes.

CT: Gojek has taken a stake in Blue Bird. What exactly does this investment and partnership mean for Blue Bird?

NP: It means that they're interested in investing in us. That also means that they still believe that our company can be beneficial for Gojek as well. So, I think that's one of the things that has been proven. I think it's a mutually beneficial relationship. We both have our own strengths and weaknesses. What Bluebird needs is to add more channels of reservations. So, with this, we can add those channels of reservations; and with the integration of our system, we can enhance our services to our customers as well.

CT: There are lots of concerns that Gojek buying a stake would give them access to critical data that belongs to Blue Bird and in a way that could be used as ammunition against you. Are you worried?

NP: Yes, well, we are aware of it, and that's the reason why we made an agreement about integration so that all the data, our passengers' data, our drivers' data are still kept within our premises, because what is important for us and what Blue Bird is known for, is safety. This includes safety of data of our passengers and our drivers. So, we need to keep it according to our own rules, which may not be the same as Gojek's. So, this is the one that we put boundaries on. For example, the reason why our drivers cannot get the number of our customers is for safety reasons. So, when our driver needs to call or talk to our customer, they need to go through our central operations so that the driver does not keep the customer's number.

CT: So, you are limiting their access?

NP: We are limiting access according to our own rules and regulation, our own values.

CT: Somehow, that raises the question of where do you see Gojek? Are they now a partner or a competitor?

NP: So, you know, it is very interesting. For us, it is still in line with our vision. We're just giving access to our customers. So, if this means giving more access to our customers, it is a good strategic alignment. We would not work together with anyone who we think would jeopardize our own business or our customers'. With Gojek, we have the same values. So, what we agreed on is that we would keep the same quality. What Gojek needs is the quality of service delivery. What Blue Bird needs is to extend or add channels of reservations. So, I think this is a mutually beneficial relationship. Blue Bird still owns a majority over the shareholders.

CT: Would you be open to them taking a bigger stake in future?

NP: We're not open at this moment. No, I think at this moment, we're just limiting, because we still want to have the biggest control of Blue Bird because the family is the guardian of the value of Blue Bird. So, that's the one that we need to make sure that is continuing.

CT: There's just so much uncertainty in the global economy right now. There are all these concerns about the destruction coming from the coronavirus and how disruptive that might be for businesses. Are you watching this development closely? Potentially, how could it impact your business?

NP: Yes, I think our market segmentation is based a lot on the middle and upper class. So, that means also that the variables are not going to be that much. But certain areas of Indonesia, for example, Bali. Bali is impacted, especially because in the past few years, there were a lot of Chinese tourists coming to Bali. So, Bali operation will be impacted. But on the other hand, we also have engaged in more relationships in the domestic market in Bali. So, we hope even though it is affected, it will pick up again and we hope this coronavirus will be handled very, very soon so that people will be able to travel again.

CT: Still, you're in the public transportation business. How are you preparing your drivers, whether it's here or Bali, how you preparing your drivers to handle this health crisis?

NP: Number one is awareness. So, we give them information about the virus so that they don't just watch or read from whatever information they receive from WhatsApp groups, you know, the social media. When you arrive at the airport, we encourage some of our staff who work inside to wear masks. So, we also ask the drivers to be aware of the passengers. If the passengers are looking not healthy, then they have to wear their mask. If they feel something, they have to report. The good thing about our company is in each depot, we have our own clinics. So, every day, the driver comes back to our depot. So, we will be able to monitor our drivers very well. So, it's about prevention.

CT: So, your move into electric vehicles and you're buying them from BYD and Tesla, is it all part of your technology transformation?

NP: It is part of our sustainability transformation because we want to contribute positively to the environment. So, when our President Jokowi initiated the idea of using electric vehicles in Indonesia, we quickly took the first step. It started two years ago with the idea. So now, we're doing pilot testing. We have made a decision that we're going to add about 200 more of the regular taxis using BYD, and we're going to add several more also for these Silver Bird Tesla X.

CT: You might be going sustainable. That's one thing. Are your investors also buying into your idea? Buying into this vision of yours?

NP: Our investors are excited as well, because the reality is - this pilot project will prove that by using electric vehicles, not only will we contribute positively to the environment, we can also reduce maintenance costs. We can also reduce the fuel costs. But that needs time. So far, I think we're pretty happy with the results. What we can save up to this moment is about 30 percent of the gasoline cost. and maintenance costs is about nine percent of our revenue. So, if we can reduce that significantly, it will improve our profit margin.

CT: So, how long does it take for you to recoup your investment into electric vehicles?

NP: Well, at this moment, it's still long. It's still about eight to 10 years, that is for the Teslas. But we hope that the price of the electric vehicle will go down, so it would be more feasible. For BYD or the regular taxis, at this moment, we're still subsidizing the price. So, that's why it takes about, as I mentioned, five to 10 years.

CT: More importantly, what's the passenger demand like for these electric vehicles, electric taxis that you have?

NP: They love it. They love it.

CT: Really, how so?

NP: We have a special lane at the airport because we are also supporting the Soekarno-Hatta Airport. They want to be a green airport, so we have a special lane there. You can see that people actually line up, and they're willing to wait because we don't have that many. So, we would like to see when will be the right time to really scale it up.

CT: And when would be the right time, you think?

NP: So, number one, when the price of battery is really down. Number two, when we get really good support in the loan itself. At this moment, we're still taking the same loan and interest as the other vehicles. So, if we can get the support of better funding for us to buy first, because we have to buy the assets, that would help a lot. The benefit would be felt after three years because that's when the operational cost savings start to kick in.

CT: But, in the meantime, EVs need charging stations. How do you get around the problem when there's a lack of charging infrastructure in this country?

NP: So, that is the reason why we chose this Tesla X and BYD, because it's already proven that they can run for 400 kilometers per day. Our taxi on average run about 220 kilometers per day. So that by itself is already safe enough for us to just have the electric charging stations in our premises. We want to change our whole fleet to zero emission.

CT: And how long will that take? What sort of timeframe are you looking at?

NP: So, this is the thing that we're trying to work out. We're trying to work with the Government. We're trying to work with a financial institution. Please help us make it faster, because we have to depend on our own strength - financial strength and our own R&D and things - it will take about five to 10 years to do it. But we can do it faster if we can get support from the financial loans for example, or whoever wants to do R&D together with us, so it would reduce our R&D costs as well.

CT: So, seven years is the timeframe you are looking at?

NP: The reason for that is because we replace our cars every five years. So, the longer we wait, the longer it will be because every year, we have to buy at least 4,000 vehicles.

CT: It's a big commitment on your part.

NP: 4,000 vehicles every year. So, can you imagine if we can replace that 4,000 every year to a fully electric car instead of combustion engines? The impact that we can contribute to Jakarta or to Indonesia.

CT: You've officially taken over from your father in May last year to be in charge of Blue Bird. What sort of leadership and management style will you provide at a time when disruption is creating so much uncertainty in the marketplace?

NP: I'm an optimist. To survive and be sustainable, sometimes we need to have that balance. Being innovative, and also trying to understand what is our real strengths and weaknesses? So, we can focus on which one we should improve on now and which one that we should keep. Also, I always engage everyone. I always say, don't think out of the box because there is no box! You just need to think and think differently. We need to engage with millennials. We need to be able to engage with our future customers and future employees. So, I think that's my task at this moment.

CT: And finally, as a third generation continuing the family's business, what impact do you want to make? What is your ultimate ambition for Blue Bird?

NP: I want Blue Bird to be remembered as a transportation company, not just a taxi company, a transportation company bringing people home safely. That applies not just for our customers, but also for our drivers. That's why another thing that we've invested heavily now is how to make our offices, our depots more homely, because our employees, our drivers spend a lot of time there. A lot of our drivers live in our head depot, in our dorm. And the legacy of our family - the legacy that my late grandmother built, my father already built up to this time - is that we want to be remembered as a company that always will be there for you. Whether rain or shine, we don't charge differently right? We'll be there, and we'll make sure that you will come home safely. But when there was flooding, we were still in operation. When there were riots, we were still in operation, you know. So, we have been proving it for 47 years and we hope we will be there also for a longer time.

CT: Noni, thank you so much for talking to me.

NP: Thank you.

END

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