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​Taxi firms tweak rental deals in face of private hire disruption

Published on: 09-Feb-2017

​Well over 1,000 cabs are sitting in the lots of Singapore taxi operators instead of plying the streets, thanks to stiff competition from private-hire businesses.

In the first 11 months of last year, 5.9 per cent of the 27,500 taxis run by the five taxi firms were unhired, up from 4.2 per cent in 2015. A recent online video had footage of the lots at Trans-Cab's Ang Mo Kio office, filled with scores of its red taxis sitting idle.

More cabbies, frustrated by how the cards have been stacked against their trade by private-car hire operators such as Uber and Grab, have been throwing in the towel. About half the more than 100,000 drivers with a taxi vocational licence are now inactive.

Taxi operators have responded by slashing their rental rates and restructuring their rental schemes.

Last month, SMRT unveiled a taxi-sharing scheme that allows cabbies to rent vehicles at hourly rates. Under SMRT Taxi Share, drivers are not responsible for the vehicle; nor do they have to find relief drivers to defray the daily rental.<

Tony Heng, managing director of SMRT Taxis and Private Hire Services, said the move is targeted at the 50,000 inactive drivers "who may want more flexibility".

SMRT's initiative follows that by biggest taxi firm ComfortDelgro, which launched its flexi-rental programme last September to staunch the outflow of cabbies from its stable.

Under its "25CJ" scheme, drivers pay a lower daily rental fee - it has been reduced by as much as half - but must complete at least 25 booking jobs (called "current jobs" or CJ) a week.

Cabbies on the scheme say the earnings are retained by ComfortDelGro as a form of rebate for the reduced daily rentals, but the amount collected is capped in a way that enables the drivers to enjoy some net savings in their rental costs.

This flexi-rental arrangement was exactly what cabby Samuel Wong, 46, was looking for. He said that when he paid a fixed rental, a large portion of the S$2,000 he earned each month went into paying for the rental and maintenance of the vehicle.

"I was about to give up and perhaps join Uber or Grab, but now that the taxi companies have introduced the flexi scheme, I will consider staying," said the cabby with 25 years' experience.​

Trans-Cab, which has a fleet of 4,500 taxis, out of which 11 per cent are idle, could not be reached for comment, but it has also announced a cut of its daily rental fee by between 22.4 and 33.9 per cent; this is for its drivers who operate their cabs in a single shift, without a relief driver.

Mr Ryan Kuan, a spokesman for Premier Corporation, said the company reviews its competitive advantage "to ensure that we provide the best offering to our taxi hirers as we have been concerned about their ​livelihood and welfare".

"We also look at our pricing policy to ensure that we are competitive at all times," he added.

But industry watchers say these incumbent taxi operators need to do more to reinvent themselves, instead of relying on flexi-rates and lower rentals.

Sia Siew Kien, associate professor of information technology and operations management at the Nanyang Business School in Nanyang Technological University, said the traditional taxi companies must know that "these new players are agile and nimble, enabled by their superior technological platforms".

The big question lies in whether the incumbents or the new players have more resources to run this race for customers.

"Unless the regulators intervene, my suspicion is that new players such as Uber and Grab will have an edge in the digital era, as they are more appealing to customers, generally cheaper, more convenient and more innovative in their service offerings," he said.

​Trans-Cab taxis sitting idle at the operator's Ang Mo Kio Street 63 premises last Dec 28. The company cut its rental rates from S$90 to S$59.90 a day for cabbies running a single-driver operation.

Source: The Business Times, 9 February 2017​​​

​Similar Stories: AsiaOne, 9 February 2017​

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