Premium Taxis – one stone cannot kill two birds

Ever fancy riding a Mercedes S-Class or Tesla for a taxi journey, with a wifi connection and a besuited driver greeting you warmly? You don’t have to wait for long. The government is proposing, in the Public Transport Strategy Study (PTSS), to introduce a new genre of taxi charging higher fares with higher quality service, including better vehicle condition, more amenities and, of course, better service.  (Photo credit: Jeni Zhi)

(Content paid for and supplied by HK Roadside)

Imagine a Hong Kong where the taxi drivers are polite, never make unnecessary detours and don’t refuse your business Without change, it’s not going to happen in the near future. According to PTSS, the government says it can virtually do nothing to improve the ubiquitous malpractice of the taxi industry. Readers probably have heard about lousy taxi service, so this article examines the proposals concerning premium taxi services.

Premium defined

Premium taxis exist in other major cities around the world to supplement ordinary taxi service in locations including Singapore and Sydney. Generally speaking, the major differences between the two tiers of service are the condition of vehicles and the service quality of drivers. Premium taxi serve a market segment which can afford higher fares and demand higher service quality.

In the PTSS document aims to create a new service that merely corrects the faults of the old system while leaving it in place. It is proposed that premium taxis will be operated by a number of franchisees who each run a fleet of some 150 – 200 taxis, and for a limited duration of 4-6 years.

The aim is to prevent a repetition of the ownership of existing taxi licenses which are permanently granted and has greatly hindered the government’s options to implement any new transport policies. Also, the level of service quality could be better standardised across a taxi fleet. In addition, the government paints a rosy picture of up-to-date amenities for premium taxis, including on-board charging, wifi connection, GPS tracking and recording, mobile apps for passengers, and more. The government has not yet decided whether to charge a franchise fee or not, which would have an implication on the fare level.

Apparently the government is attempting to kill two birds with one stone. On the surface, premium taxis cater for the demand of higher-quality taxi service, genuinely in demand as evidenced by the popularity of car hiring services like, but not limited to, Uber (although no data from Uber has been revealed regarding its ridership). On a deeper level, the government model attempts to develop a model of taxi operations and monitoring mechanisms which is more rational and common across the developed world, making taxis more responsive to changes in policies and customers’ expectation. To put it more boldly, the government is preparing to implement a system that could replace the current, deeply flawed system.

For the first “bird”, creating a new higher level option, we welcome the introduction of a premium taxi service whose market niche is currently filled by mobile car hiring apps like Uber. The benefits of a formalised premium taxi service is that a constant supply can be maintained and the fare level can be kept stable, in contrast to Uber’s unstable supply and fluctuating fare level. Also, its service quality could hopefully be kept more constant thanks to its fully employed driver workforce, unlike ride sharing services whose drivers are self-employed, some on a part-time basis, perhaps leading to dramatically variable service quality. The question is whether a fleet of 600 vehicles is enough to create a new market segment that could sustain itself. If the potential passenger demand is very high, passengers could have difficulty hiring premium taxis and may lose confidence in the service’s availability and convenience.

As for the second “bird”, fixing the current system, we are very disappointed by the fact that the premium taxi scheme, while well thought through to avoid systematic problems with existing taxis, is not designed to improve ordinary taxis’ performance at all. The government has simply given up on modernising the taxi licensing arrangement or stepping up law enforcement against the wrongdoings of taxi drivers. No matter how wonderful the service of premium taxis will be, it would do little to inhibit the negative behaviours of ordinary taxi drivers. The government has always relied on the voluntary action of the taxi industry, which involves some 9,000 owners of the 18,000 taxi licenses, to initiate any improvement measures. But as a matter of fact, these efforts has been very limited and insignificant. For example, the government celebrates the formation of a 300-vehicle taxi fleet with centralized management. But this is less 2% of the whole taxi fleet of the territory.

Apart from the above, the government has yet to provide an estimate of the traffic impact of a 600-strong premium taxi fleet on the already congested roads of Hong Kong. This only equates to about 3% of the ordinary taxi fleet. The “premium” nature of these taxis will be likely to concentrate in the busiest commercial districts, such as Central, Causeway Bay and Tsim Sha Tsui. We worry that the introduction of premium taxis, whose fleet size may expand after the pilot run, will further exacerbate congestion in these areas. Lengthening travel time and worsening roadside air quality. Conversely, if premium taxis will serve the higher end passenger segment, what percentage of its demand will be shifted from ordinary taxis, private car hiring, owned private cars or newly generated trip? These figures will be useful to better picture the impact and therefore position of premium taxis in the transportation system.

Besides, the mode of operations of premium taxi remains unclear. Apart from ordering via. mobile apps, it is possible that they can also be hailed on the street or at taxi stands together as ordinary taxis. The most puzzling matter is the arrangement of the use of public transport facilities. For example, will passengers be able to ride a premium taxi at a ordinary taxi stand? If yes, then is there enough space in existing taxi stands and are the layouts feasible to be re-arranged so that premium taxi vehicles can queue separately? Such change could incur not just monetary cost but also impact the operations of ordinary taxis.

Judging from the information available at the moment, we do need premium taxis – with the growth of the wealth of society, this demand exists and is being satisfied through pre-existing businesses. But unfortunately, it has not become the cure to our old taxi predicament, and we should not stop to push for the real reform of a too-long protected industry.

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Sensible Transport

Sensible Transport is a group of local transport professionals concerned with the sustainable development of urban transportation system in Hong Kong.”]