The entry of private car hire apps is causing ripples across the globe. The trend is now catching on in the taxi industry with flashy new entrants hogging the market share. Over the years, companies such as SMRT used to rule the streets of Singapore but this is changing with the entry of global powers that are leveraging smartphone technology.
Global Phenomenon
With over 94% of Singaporeans owning a smartphone, the entry of companies such as Uber and Grabcar taxi companies has excited the market. The companies have caused a global phenomenon but in Singapore, traditional taxi companies still rule the roost. The effect has been a big hit to the former big players with the RHB Research predicting marginal taxi fleet growth of 1.5% in 2016.
The taxi hire apps enjoy a lot of freedom in Singapore because the authorities are yet to set rules that would benefit users and taxi firms. This loophole has enabled new players such as Uber to slowly edge out traditional firms. The ripple effect has also been made more prominent by the new company’s innovativeness including allowing more car owners into their fleet.
The car hire apps have also been made popular by customers’ appreciation of the innovativeness of the product. Another reason for the growing excitement is the fact that the new companies are allowing more personal car users to join their clique and enjoy the benefit of a global outfit on Singapore roads. As an Asia-Pacific financial hub, the country seems to have been ripe for exactly this kind of change on the roads.
Weathering the Storm
The RHB Research, nevertheless, says older taxi firms can also leverage the same technology to beat the new players. The report also says the industry will still post strong revenues as the government moves to regulate car hire apps. Already there is growing pressure to standardize the industry amidst car hire apps security concerns in countries such as India.
The research also says replacement of older cars with new taxis under a Certificate of Entitlement (COE) will lead to a rise in asset costs. The resultant effect will be an increase in rental rate for taxis. This means the industry will still post good revenue incomes despite reduced fleet numbers.
Taxi owners also have something positive to enjoy from the RHB Research which says the hype about car hire apps will gradually die off once the regulator comes up with stringent conditions to level the playing ground.