New regulations won’t halt decline in taxi population, say industry watchers
RECENTLY announced changes to requirements for taxis will reduce costs for operators, but will not reverse the trend of a dwindling taxi population, said industry watchers.
Ride-hailing platforms will continue to be dominant, even though taxis will always have a role to play for certain groups of commuters, they added.
New regulations for the point-to-point (P2P) transport sector, which includes taxis and private-hire cars (PHCs), were announced at the debate on the Ministry of Transport’s budget on Mar 5.
These aim to “reduce the operating costs of taxis, and rationalise the inspection regimes for taxis and PHCs”, said Senior Minister of State for Transport Amy Khor, when announcing the moves.
The statutory lifespan of non-electric taxis will be lengthened to 10 from eight years, and the frequency of inspections lowered to once per year from once every six months. Smaller taxi operators will also no longer be required to maintain call-booking services.
Yet these changes, said industry watchers, do not address the underlying reason for the fall in taxis: a shift in commuter preferences towards ride-hailing.
Taxis axed
Singapore’s private-hire vehicle population reached an all-time high of 82,503 in February 2024, up from 16,396 at the end of 2013.
The number of taxis has fallen to 13,620 – less than half of the 27,695 figure in 2013.
As at January 2024, street hails formed just 12.3 per cent of daily P2P rides, or 74,000 of an average 601,000 such rides. Unlike PHCs, which may only be ride-hailed, taxis can take both ride and street-hail jobs.
Walter Theseira, associate professor of economics at the Singapore University of Social Sciences, said the decline is because operators and investors have “simply concluded that the risks and returns from investing in taxi-fleet expansion are not worthwhile”.
Less frequent inspections and a longer statutory lifespan will ease costs for taxi fleets, but it is clear that taxis are no longer competitive against PHCs, he said – a view shared by Raymond Ong, an associate professor at the National University of Singapore’s Department of Civil and Environmental Engineering.
Both academics concurred that the most notable competitive advantage that taxis have – street-hailing – is not enough.
Prof Theseira noted that taxis have the small advantage of being registered with a Category A Certificate of Entitlement (COE), which tends to be cheaper. In contrast, PHCs may have to be registered with a more expensive Category B COE, depending on the car model.
But PHCs have more overall flexibility, he added. A PHC may be sold as a second-hand passenger car, unlike a taxi.
PHC fleets may offload vehicles to the used-car market as an “escape valve”, he noted. This is an important means of reducing the risk of being stuck with an asset during a market downturn, or if maintenance costs threaten to outweigh the value of the car itself.
“Given that the majority of P2P rides today are booked via apps, and this share is expected to continue increasing, given the ageing demographics of those still reliant on street-hail or call bookings, I think the market disadvantage of taxis will continue,” said Prof Theseira.
Platforms elevate
Said Prof Ong: “The fact is that taxis are no longer as competitive as PHCs, as can be seen in both market share and number of drivers. The question is really: Do we need to have taxi services, and why?”
Both academics agreed that taxis play a role in providing a more stable supply of rides, and in serving commuters who do not use ride-hailing apps, such as the elderly or tourists.
“Especially with an ageing society, such issues might become even more apparent. Hence, these P2P changes are necessary to at least make taxis somewhat viable to operate, through reducing operator costs and improving driver incentives,” said Prof Ong.
But in the overall P2P market, the dominance of ride-hailing means that taxi operators must develop their own ride-hailing platforms to remain competitive. ComfortDelGro is the only taxi operator with its own such platform, CDG Zig.
Prof Theseira said that because taxi operators are fleet owners, their profits come from the efficient operation and rental of their fleets. Those with economies of scale in such operations can simply extend these to their own PHC fleet.
But without its own ride-hailing platform, a taxi operator’s ability to extract value from its fleet will rely on a third-party booking platform, he added.
“So the choice really is to accept that some control over your business is in the hands of a third party, or to integrate (with) the platform as well, as CDG has done,” he said.
In the results for its financial year ended Dec 31, 2023, ComfortDelGro reported a 4 per cent or S$11.3 million increase in revenue from its taxi/PHC business, which it attributed to the introduction of a platform fee for CDG Zig and the expansion of its PHC fleet.
