Fare cuts by Uber, Grab will hurt sector: Taxi body

Strategy unhealthy and unsustainable, and ‘price war’ will hit private-hire car drivers and cabbies alike, says NTA

by Adrian Lim

Source: http://www.straitstimes.com/singapore/fare-cuts-by-uber-grab-will-hurt-sector-taxi-body

The National Taxi Association (NTA) has criticised the recent price cuts by Grab and Uber, saying they not only hit their drivers’ earnings but, if left unchecked, could also hurt the taxi industry and, ultimately, commuters.

“It’s an unhealthy and unsustainable business strategy,” said NTA executive adviser Ang Hin Kee.

On April 14, Uber cut fares for its UberX private chauffeur service by an average of 15 per cent. Four days later, Grab slashed its GrabCar prices by up to 14 per cent, with minimum fares falling from $8 to $4.

economics of taxi pricing
Cab firms, which had fares comparable to those of UberX and GrabCar before, are now under pressure after the recent price cuts, said National Taxi Association executive adviser Ang Hin Kee.ST PHOTO: LAU FOOK KONG

Cab firms, which had fares comparable to those of UberX and GrabCar before, are now under pressure, Mr Ang told The Sunday Times. But a “price war” would mean both private-hire car drivers and cabbies having to do more trips and driving longer to earn the same amount.

“We don’t want to go down this road,” he said.

Mr Ang, who is also an MP for Ang Mo Kio GRC, pointed out how both app companies were still taking their 20 per cent cut from their drivers, despite having shaved fares.

The worry is that if private-hire car firms end up dominating the market, they can then start raising prices, and charge a premium.

“The new players will (first) offer a lot of goodies… But when they have the market share later on, they could exercise the right to earn profits,” said Mr Ang. “What checks and balances do we have to ensure that both commuters and drivers are not taken advantage of?”

Earlier this month, the Government said that by the first half of next year, Uber and GrabCar drivers must be licensed and undergo background and medical checks, and also have to register their cars.

Mr Ang said that while the taxi industry welcomes competition, the playing field is not level, given that cab operators must factor in “compliance costs”. These include the bulk of cabbies having to meet certain standards set by the Land Transport Authority, such as covering 250km each day and being on the road during peak hours. Fleets also have to be serviced regularly.

“Cab firms hire teams of people to manage this, and these costs are passed down to the taxi drivers through their rentals,” said Mr Ang.

While these yardsticks benefit the public, he believes similar standards should be imposed on the private-hire car business. Alternatively, have these requirements lifted from taxi firms, he suggested.

Head of Grab Singapore Lim Kell Jay said the fare cuts have led to a “tremendous growth” in passenger demand. This means drivers are getting more bookings over the same length of time, and bringing home “comparative incomes”. He added that its part-timers and full-timers make a gross average of $30 an hour.

Asked about its drivers’ earnings after the fare cuts, Uber said it would share details later.

Some private-hire car drivers told The Sunday Times that their earnings have been hit by around 20 per cent since the price cuts.

Dr Walter Theseira, an economist at SIM University, said traditional cab operators have a key advantage – they are the only ones allowed to get flagdowns. Still, they face a tough battle. He said: “App companies are willing to lose some money now to gain market share, but the incumbents wouldn’t want to do this after being profitable for so long.”

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