Sorry, Uber and Grab, you’ll never defeat taxis in Singapore: report

Cabbies are loyal to incumbent operators.

When car booking apps Uber and Grab first began to gain traction in Singapore, analysts feared that the widely popular apps will soon leave incumbent taxi operators gasping in the dust. However, a new report asserts that neither Uber nor Grab will ever be able to dethrone good old taxis in Singapore.

Brokerage firm CIMB said that the threat posed by booking apps is “overhyped”, saying that serious drivers are unlikely to jump ship and leave their incumbent operators in order to drive for the startups.

“Our research shows that earnings from taxiing are more stable and usually higher than from U/G driving. Hence, taxiing should remain the choice for serious drivers who depend on driving to make a living. U/G driving works for casual drivers who are less concerned about earnings and for those who need a car for business/family use and want to defray the cost by earning an income out of it,” CIMB said.

CIMB drew its data from interviews with over 30 drivers. The report noted that without the incentives offered by booking apps, taxi drivers earn substantially more than Uber and Grab drivers.

In the early days, Uber and Grab dangled tempting incentives for drivers, amounting to roughly $1,000 to $2,000 in a single week. These incentives have since fallen to just $200 to $300 per week, CIMB said.

“The high incentives inevitably attracted a number of taxi drivers to make a switch to Uber/Grab. Since then, Uber/Grab have been consistently cutting their incentives granted to drivers, a sign that Uber/Grab is satisfied with the size of their driver pool, in our view,” the report said.

“We expect Uber/Grab to continue reducing their incentives granted to drivers in order to seek or optimise their profit. Incentive-cutting will lead to further downside for Uber/Grab drivers’ earnings, making Uber/Grab less appealing to drivers who can drive taxis as an alternative. We foresee more ex-taxi drivers who were attracted to join Uber/Grab by the high incentives returning to the taxi business,” CIMB added.

Fuel efficiency is another factor against Uber and Grab, as most cars used for booking app purposes are predominantly petrol-fuelled. These cars are almost twice as costly in terms of fuel costs compared with diesel-powered taxis.

In addition, the extremely high taxi penetration rate in Singapore means that it is less difficult for commuters to get a taxi in Singapore than in other cities, making it harder than elsewhere for Uber/Grab to get jobs for its drivers during off-peak hours.

“We expect the competition pressure for taxi operators to ease ahead as Uber/Grab continue to cut incentives granted to drivers. We expect a new steady state to be reached soon,” CIMB said.