ComfortDelGro’s recent move to expand its fleet is the “big U-turn” that indicates signs of a turnaround in the local taxi industry, some analysts say.

SINGAPORE: When his contract with ride-hailing giant Grab ends in a month’s time, Mr Gregory Lim intends to give up his Mazda 3 for a Prius Hybrid taxi from SMRT – reversing a move he made last year.

Experiences of waiting for an assigned booking and getting cancellations after spending time travelling to a location have made the former taxi driver miss the days of being able to pick up passengers off the streets.



The 41-year-old also lamented that he no longer has the drive to clock long hours on the road amid shrinking cash incentives.

“After Uber is gone, so are the incentives,” Mr Lim said, referring to Grab’s landmark deal to acquire the Southeast Asia operations of its American rival. “Becoming a private-hire car driver was all about the incentives.”

Also mulling a return to the taxi industry is former ComfortDelGro cabby Sabastian, who cited taxes as his main consideration.

The driver, who preferred to be known by his first name, said monthly expenses, such as vehicle rental and petrol, can amount to S$2,500 or more. But unlike cabbies, these are non-tax-deductible for private-hire car drivers.



“Don’t forget that Grab takes a 20 per cent commission so after these deductions, I’m not left with much to take home,” said the sole breadwinner. “Tax is a problem not just for me, but many drivers too. That’s why we are thinking of going back to taxis.”

In recent years, traditional cab operators in Singapore have taken a hit with ride-hailing services hot on its wheels. Apart from passengers, it also witnessed an exodus of driver-hirers which at one point in time, left fleets of taxis lying idle in yards.

But with the change in hearts among some drivers, at least one taxi company is benefiting.

Industry leader ComfortDelGro announced earlier this month that it has placed an order for 200 new cabs – its first in close to one-and-a-half years.

This was meant for the “uptick” in demand for its taxis over the last month or so, said company spokesperson Tammy Tan. The taxi giant signed on close to 300 new hirers in April – nearly double the same period last year.

Channel NewsAsia reached out to the other taxi operators with queries on whether they are noticing the same trend, but they did not respond or declined to comment.

On why some private-hire car drivers are changing tracks, transport analysts cited the rollback in monetary rewards as a key factor.

Previously, incentives as much as S$2,500 a month were achievable, according to drivers that Channel NewsAsia spoke to. These days, that has been halved.

“If I’m a driver, I will naturally sign up with the company that can give me the highest income,” said Dr Lee Der Horng from the National University of Singapore (NUS). “But just like promo codes, these upfront incentives were unsustainable. Now things have changed, drivers are feeling concerned.”

Echoing that, Dr Park Byung Joon from the Singapore University of Social Sciences (SUSS) said perks, which included hefty bonus rewards and vehicle rental for as low as S$60 a day, have been “distractions” for many taxi drivers.

“But when the time comes for no more incentives, they will start thinking which is more economically viable,” he said, while adding that taxi operators provide benefits such as maintenance support.

With “things back to how they are supposed to be”, Dr Park reckoned that there will soon be “a balance” between those behind the wheels of taxis and private-hire cars.

When contacted, a Grab spokesperson said: “Be it private-hire cars or taxis, drivers can choose their preferred services based on their lifestyle needs and preferences."

As a technology company, its role is to provide a platform for drivers, merchants and other partners, while using "technology to enhance the overall efficiency of the transport system". It is also “focused on bringing down the everyday costs” for drivers and has provided greater welfare support, such as discounts on fuel and mobile plans, added the spokesperson.



File photo of a taxi driver.

IS THE WORST OVER FOR TAXIS?

With the recent developments, industry experts said the taxi industry could see smoother roads ahead.

Dr Park, for one, said cab operators can “finally breathe a bit easier”, thanks to the Grab-Uber deal.

“Uber and Grab burning cash to buy market share had been a painful time for the local taxi companies. But the deal means that Grab will no longer need to do that – promo codes and big incentives, those days are over,” he said.

“This will be a huge relief for not just ComfortDelGro, but all taxi operators.”

Phillip Capital Research investment analyst Richard Leow went as far to say that the battered industry’s worst days may have passed.

He noted that the consolidation of the two ride-hailing giants has led to “pricing rationalisation, in turn resulting in some flow of drivers back to taxis”. More importantly, ComfortDelGro’s move to grow its fleet again is the “big U-turn” that may signal “the worst could be over”.

True enough, the biggest taxi operator in Singapore struck an upbeat note in its earnings report last week despite a near 20 per cent fall in first-quarter net profit.

"Revenue from the taxi business is expected to stabilise with the rationalisation of the competition landscape in Singapore,” said ComfortDelGro Group CEO Yang Ban Seng, while adding that there will be a more level playing field ahead.

Even with a host of new upstarts jostling to fill in Uber’s void, analysts said it may take some time before competition can be revved up again.

This is because new players, such as Ryde and Jugnoo, have only launched their services this month and remain in the early stages of building up a sizable fleet, said Dr Lee.

Earlier reports have suggested that homegrown firm Ryde started off with about 5,000 drivers, while Jugnoo signed up 100 and is hoping to hit a target of 2,000 by the end of the month.

The relatively smaller capital backing that these new disruptors have also seems to suggest that they may opt out of the “expensive strategy” of doling out incentives to attract drivers, said Dr Park.

“But if they don’t intend to do the same as what Grab and Uber did, then I don’t think it’s going to be easy for them to build up their network quickly,” he added.

Still, this does not mean that the taxi fleet in Singapore could halt the brakes on recent declines. Statistics from the Land Transport Authority (LTA) showed the overall number of cabs plying the streets fell to 21,746 in March - its lowest in more than a decade.

While there could be a recovery in a few months, Dr Park thinks it will be unlikely for the taxi population figure to return to its heydays in 2014, when there were more than 28,000 taxis on the roads.

Cab operators also need to stay vigilant and continue to improve their business models by doubling down on innovation or take the opportunity to optimise their fleet, said Dr Lee.

In the case of ComfortDelGro, it will likely need to have a presence in the private-hire car space if it wants to have an even smoother recovery, according to RHB Research analyst Shekhar Jaiswal.

When contacted, the taxi operator declined to comment on updates for its joint venture with Uber on the acquisition of a stake in Lion City Holdings.

Meanwhile, recent reports also suggested that ComfortDelGro has perhaps turned its attention to Indonesian ride-hailing service Go-Jek.

"We await the final outcome of ComfortDelGro’s deal with Uber … and the Group’s definitive strategy to expand into private hire car business,” Mr Jaiswal said in a note. “We believe (it) needs to finalise a definitive strategy for private hire car business soon.”