Singapore’s taxi rates are the Bermuda Triangle of finance. If we could replicate them in the stock market, the US would have been celebrating a surplus last July. They have the magical tendency to go only upward, despite nigh-invisible improvements in service and availability.
How Have Rates Gone Up?
Flag-down rates have risen for new taxi models. Because “What we want are new, more expensive taxis” claimed Singaporeans everywhere, according to the cab company’s imagination.
Some examples are ComfortDelGro’s Hyundai i40, with a flag-down rate of $3.70. SMRT’s Toyota Prius has a flag-down rate of $3.80 (because when you have a hybrid electric designed to use less fuel, it makes sense to charge more for trips.)
Trans-Cab’s Renault Latitude is the most exorbitant, with a flag-down charge of $3.90. For more details, see the coverage on Yahoo!
Over time, existing cabs will be phased out and replaced by these models. After which, the flag-down rates will be restored to their previous levels.
And also, bacon is fat free. Seriously, rates will stay at their wallet-gouging levels, because have you met cab company management? Somali pirates would accuse them of being too mercenary.
The Reasons We Think Flag-Down Rates are Going Up
In our opinion (and opinion only), these are why flag-down rates are really going up:
- Incentivise More Pick-ups
- Lack of Serious Competition
- Less Affordable Private Transport
1. Incentivise More Pick-Ups
Availability’s a big issue with cab companies. They get assigned COEs based on how available their taxis are; and the more cabs they have, the more money they make.
Problem is, our cab drivers pick up fewer people than a syphilitic drunk in a trendy nightclub. Remember, these people are pretty much self-employed. If they happen to be retirees with a paid-up home loan, they can afford to earn less.
So if one of them decides to queue up at Changi airport all day, and go home after six passengers, what can the cab companies can do?
Since they’re lacking a stick, they’re using a bigger carrot. A higher flag-down fee means more earnings per customer, and hopefully, better availability. This “strategy” is focused on raising the fees so high, even a jaded retiree will bother to start picking people up.
Maybe instead of doing that, they should, I dunno, hire a competent Human Resource manager? How’s that? This is what an interview is for. Weeding out the driven ones who really need the job (and there are plenty of cab drivers who genuinely work hard.)
2. Lack of Serious Competition
When one cab company raises its price, all the other cab companies follow suit. There’s no threat of a competitor undercutting them by retaining its fares.
(Can you imagine if all the Telcos did that? The people at CASE would burst an artery).
Thing is, a cab company can’t compete that way even if it wanted to. See, a cab company’s revenue doesn’t come from the fees they charge you. Their money comes from renting out their cabs. The drivers pay a rental fee for the use of the cab, and anything they make is theirs to keep.
In short, the drivers are more like clients than employees. And if a company insists their drivers charge less, their drivers will simply join another cab company (thus reducing the company’s rental revenues).
Because of this, all cab companies tend to move in tandem. When one raises fares, the others pretty much have to follow, or risk losing drivers.
3. Less Affordable Private Transport
If you’re taking a cab to get somewhere, chances are it’s because the bus or MRT won’t do. Too slow, the area is inaccessible, etc. So what’s your solution?
Buy a car? I doubt so, considering we have one of the most expensive car markets in the world.
Which leads to the same issue in point 2. Cab companies exist with little or no fear of boycott. Short of disparaging Facebook remarks, there’s nothing you can do about it.
Why Quibble Over a Small Increase?
Obviously, the worry isn’t that a cab ride costs 30+ cents more. The worry is the structure of the taxi industry; there are few checks against its upward price spiral.
Perhaps what we need are more cab companies, without raising the number of COEs set aside for them. The squeeze will prompt a more enthusiastic business approach from cabbies. Otherwise, we might want to reconsider the whole cab rental system.
Get more Personal Finance tips and tricks on www.MoneySmart.sg
More From MoneySmart