This Dinosaur is Dying. The Taxi Industry is Meeting its Asteroid.

by | Traveling

The Yellow Cab company was first formed in 1908 by John Hertz (who later formed Hertz rental car) at the same time the first Model T rolled off the production floor at Ford.  Since 1908, the yellow color of taxis has been a dominant symbol of the industry. Today the biggest taxi markets are Europe which has 450,000 taxis, USA has 300,000+ and China has 500,000 taxis. This industry which has been around for 100+ years is now in the midst of a radical shake up like its never experienced before.  In a recent conversation with taxi car owners in the USA, this is no more just speculation with revenue for taxi drivers down significantly, owners of these cars are having to drastically reduce the fees they charge drivers.  The reason? Just like every industry that has been touched by the internet, mobile and computing technology…the taxi industry which has been typically regionally and government protected through regulation is now hearing the voice of the customer loud and clear through their choice in using alternatives to taxis and rapid growth of software apps.

One of the frequent and common causes of grief for taxi customers fall into 3 categories: drivers are not friendly, pick up times are not guaranteed and cars may not always be in the best condition.  Like any generalizations these do not apply to all taxi services and some are very good while some are not.  But what has been clearly showed is that there is dramatic room for improvement from the perspective of the customer. On a recent trip to my local airport, even my “black car” driver had echoed these general concerns of the taxi industry.

The most prevalent issue with taxis around pick-up time is the problem that is most easily solved through mobile software apps which are experiencing rapid growth not only in the USA but also in China.  In just over 2 years from  early 2012,  taxi hailing applications in China have gone from  zero requests to almost 340,000 per day.  The most common model in China is a customer would request through their smartphone that a taxi come pick them up at their location. Although this sounds normal, at peak times in China, getting a taxi can be almost impossible so this service has been amazingly popular.

Tackling the friendliness of drivers and the conditions of the cars are another target for improvement in the taxi industry. In the USA, this is being solved by various software app companies by having privately owned vehicles pick up passengers (whom must adhere to uniform quality and service metrics).

But like any industry under extreme competitive pressures, the taxi industry is fighting back through legal battles to keep its monopoly position. But the good news is that the voice of the customer is being honored and although government regulation has not completely disappeared there are some interesting modifications being implemented.  For example, in the USA private cars cannot be hailed down by customers on the road, .they can only be called through the apps. The USA Internal Revenue Service has recently implemented rules on how much they can charge.  In France, private cars are being forced to wait 15 minutes before they can pick up a passenger. In China, the Beijing government recently “approved” only 4 software apps for the region.

The rules of the taxi industry are changing and they can either hope this asteroid will pass them by or they can figure out how to survive in this new world.


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