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Taxi apps: Boon or bane?


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The way investors are falling over themselves to put hundreds of millions into taxi apps, you would think they had found a cure for cancer.
 
In just a little over three years, more than a dozen of these companies promising to find you a ride when you need one have sprouted across the globe, sucking billions in venture capital and grabbing headlines everywhere.
 
But will they deliver the change they promise or will they fizzle out like the tech start-ups that mushroomed in the late 1990s?
 
On Wednesday, London-based Hailo announced that it has raised more than US$100 million (S$127 million) since it started three years ago.
 
Interestingly, it has also managed to get SMRT Corp onboard - despite being a direct competitor to the local operator's taxi dispatch business.
 
Last week, GrabTaxi, which started in Malaysia (also three years ago) said it has secured US$90 million in funding just this year.
 
Easy Taxi, backed by German Internet start-up Rocket, has likewise propelled itself forward with US$100 million raised.
 
They are matched by a number of other apps in Asia, like TaxiWise (Hong Kong), OlaCabs (India), PingTaxi (Vietnam) and Blue Bird (Jakarta).
 
The biggest, according to online news provider Tech In Asia, may well be China's Didi Dache and Kuaidi Dache, which have attracted huge funding from Chinese tech giants such as Tencent and Alibaba.
 
But they pale in comparison to Uber, which has raised US$1.5 billion from investors - including Google - since it started up in San Francisco in 2010. The company is said to be valued at US$18 billion today.
 
And according to estimates by TechCrunch.com, calculations based on leaked information alluded to Uber enjoying an annual profit of over US$200 million on the back of US$1 billion in revenue. Not bad for a four-year-old start-up.
 
No wonder others such as Lyft, SideCar and RelayRides have jumped on the bandwagon. More will do so. And more will want to come to Singapore.
 
On a per capita basis, the Republic has one of the biggest taxi populations in the world, and its cab patronage also ranks as one of the highest. Some 28,000 cabs here cater to 970,000 rides a day in a city of 5.4 million. In Hong Kong, where 7.2 million people live, 18,000 cabs cater to one million rides a day.
 
So there is clearly money to be made. The question is: What is in it for the commuter?
 
While hard numbers are unavailable, anecdotal evidence suggests that the public is warming up to the newcomers nicely. The hip are now "Uber-ing" instead of "cabbing", and it is common to find the GrabTaxi icon alongside YouTube and Facebook on smartphones. Users cite ease of use, decent response time and "live" tracking of a dispatched taxi that gives a measure of certainty while you wait.
 
While booking rates are pegged close to what the incumbents are charging, they are likely to fall as competition hots up.
 
Already, these newcomers charge cabbies less for dispatches than established operators like Comfort and CityCab to win them over.
 
But what happens when competition intensifies, with, say, five to 10 apps jostling for business? This may lead to a fragmented market, as app providers devise ways to block out other apps.
 
This is already happening. Easy Taxi has accused GrabTaxi of blocking its app. Similar accusations are flying in other cities between app providers.
 
So, at the end of the day, the commuter may be back to square one, where he is held hostage by an app he has chosen to download. This limiting factor will apply to cabbies too, unless they want to end up holding multiple smartphones.
 
The ideal situation would be to have a single app that reaches out to all available taxis in the vicinity. But that is as unrealistic as having a unified call-booking centre. It simply goes against the principle of competition.
 
The Land Transport Authority, which has long subscribed to "managed competition" in the public transport sphere, seems uncharacteristically relaxed when it comes to the new apps.
 
Taxi operators question whether the playing field is level. After all, the newcomers are not governed by the strict safety and service standards set for the cab industry.
 
There have also been calls for crackdowns on regular motorists roped in by app companies to provide "limo" services. This enlarges the pool of drivers that players like Uber and GrabTaxi can tap into.
 
But it is clearly against the law, as it exposes the commuter to risks, with lack of recourse in an accident being the least of his worries.
 
For instance, there is no stopping a predator slapping on an Uber sticker on his car and cruising near a primary school.
 
A number of cities have banned such apps. Most recently, Germany banned Uber, saying its services violated the Passenger Transportation Act because its drivers do not meet criteria such as a health examination.
 
Early this year, Shanghai followed Beijing's lead by banning cabbies from using taxi apps during peak hours. Apparently, drivers were shunning street hails in favour of app bookings, which were more lucrative. Sounds familiar?


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