Uber Concerned: Lack of insurance and quality of service standards may see regulator backlash

Who's really winning the taxi war?

The emergence of taxi-booking apps like Uber and GrabTaxi are taking the streets of Singapore and sideswiping traditional taxi operators but their fame might not last for so long. According to Maybank Kim Eng, with increasing popularity, some of these taxi-booking apps could struggle due to regulatory hurdles (eg, insurance coverage and service quality standards).

Here's more:

New entrants, armed with innovative app-based business models, look set to shake up the taxi market in Singapore as their presence continues to grow.

They can be divided into two broad categories: (1) Entrant Model A, whereby companies channel passenger traffic to existing taxi drivers, and (2) Entrant Model B, whereby companies link passengers to limousines and private vehicles. 

Headline concern: Impact on booking income 

The potential loss of taxi booking income is a key headline concern. However, our analysis suggests minimal impact on the profitability of taxi operators. Even if booking income plunges by 20%, the potential loss of profit would translate to a mere 3.4%/4.3% of ComfortDelGro’s/SMRT’s Singapore taxi EBIT. This is an even smaller proportion of the respective groups’ total profit. 

Operators stand to benefit in the long run 

We argue that the new entrants would augment the overall revenue pool of Singapore’s taxi industry, benefitting operators in the long run. Currently, only 10% of taxi journeys are completed via booking systems, but we expect penetration rate to increase by 5ppts within the next three years as passengers take to the new apps. 

This implies the industry’s annual revenue pool could go up by SGD52m or SGD5.16 per taxi per day. Asset ownership, however, would remain vital in the taxi ecosystem and we expect operators to lift rental fees over time in response. This should offset any potential near-term loss in booking income. ComfortDelGro has the largest taxi fleet in Singapore and is thus most exposed to the impending changes.