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Can Surge Pricing And Fixed Fares Really "Level The Playing Field" For Taxis? Probably Not.

Another day, another attempt to “level the playing field” between private-hires and taxis.

This time, The Straits Times reported that Grab commuters booking taxis would soon have “more certainty about their fares” with its new service called JustGrab.

Think: upfront pricing, as compared to the estimates we usually get whenever we scroll to the taxi option on our Grab apps.

Another point to note is that the fares are subject to a new pricing system, which will take into account travel time, booking fees and also location and time-based surcharges.

They would also be subject to a “new pricing system that would increase (the fares) during periods of high demand” – basically, the surge/dynamic pricing system that taxi firms recently adopted alongside Grab.

Surge pricing works on the basis of demand and supply, meaning that when demand is low during off-peak hours, the fares are also lower, and vice versa.

However, while the system works to match supply to demand, experts have commented that there’s a “lack of transparency” that comes with the rates. Because honestly, who’ll know if the supply is really as low as the surge suggests?

Second Minister for Transport Ng Chee Meng, who commented on the recent introduction of dynamic pricing by taxi companies, said that the new system should “improve – and not worsen – the matching of supply to demand of taxi services”.

National Taxi Association executive adviser Ang Hin Kee also mentioned that while “dynamic pricing could help cabbies earn more, it was important that taxi fares remained ‘competitive’, compared with those of private-hire cars during peak periods”.

It is not known when JustGrab would start.

Will These Moves Really Make Competition Fair For All Sides?

At the start of February, the Land Transport Authority (LTA) introduced the Private Hire Car Driver Vocational Licensing (PDVL) framework, which will see private-hire drivers needing to be registered and undergoing the safety training, background screening and demerit point system that taxi drivers have been abiding to.

Taxi drivers are also set to see some improvements – being taught how to use GPS, having their training sessions conducted online than off, and refresher courses shortened by nearly half.

The taxi availability framework has also been relaxed since the start of 2017, and taxi drivers will no longer need to adhere to a minimum daily mileage of 250km, or need to meet availability requirements between 6am to 7am and 11pm to 12am, known as the “shoulder peak periods”.

However, it is still uncertain how all of these moves would lead to a fairer playing field for private-hires and taxis.

Even now, a quick comparison between GrabTaxi and GrabCar rates shows that it would be more costly to take the former:

GrabTaxi vs. GrabCar rates

It’s hard to say if taking up the surge pricing arrangement would make taxis more attractive to commuters in terms of prices. Also, given that the new pricing system only applies to cabs booked through the app, hailing a cab along the road would still be as unpredictable as ever.

There also seems to be common sentiment among commuters that hopping onto the surge/dynamic pricing bandwagon actually drives taxis further into their already dug graves:

Screenshot from ST
Screenshot from ST
Screenshot from ST

What Could Be Done

What needs to be changed, first of all, are the differences between the rental rates for private-hire and taxis.

While taxi company Transcab had announced the slash in their rental rates for a basic Toyota from $90 to $59.50 (before GST) per day, the relatively higher rental rates for taxis from the other companies still remain a burdensome cost passed onto the drivers. (Compare the rates for Uber-preferred rental company Lion City Rentals here.)

Next, the service standard of taxis needs to be upped so as to match what UberX and GrabCar drivers are giving to commuters. Maybe it’s the presence of a rating system for the latter that keeps the drivers in check, but hey, it works.

Or perhaps, instead of the obsession on making the competition fair with legislation, taxi companies should instead be finding ways to make their service an irreplaceable option for certain occasions and commuters.

Take for example how Grab is moving into various verticals (GrabShuttle, GrabCoach etc) so that they can provide a service for commuters with different needs.

Lastly, instead of acting like separate entities with different base rates, taxi companies can come together to impose a common base fare, and the various surcharges (midnight, peak etc) be made clearer, so that commuters can make a better informed decision.

Playing with prices and gunning for the lowest denomination will only get so far in the long run, and it’s not just up to the government, but taxi companies need to make positive changes to their models to benefit not only their profit margin, but also their drivers and loyal riders.

Featured Image Credit: Du học Singapore

 

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