New taxi scheme comes under fire; sad response to Uber pleases no one

A scheme proposed by the Hong Kong government to introduce 600 premium taxis to Hong Kong has been criticized as inefficient and even destructive.

The government is establishing a regulatory regime to introduce a franchised taxi service that would allow three companies to run a total of 600 franchised taxis that offer “premium” rides, meaning that they guarantee better service and driver attitude.

“The move meets the community’s new demand for personalized and point-to-point public transport services of higher quality and with online hailing features,” the government said. These premium taxis will also provide phone charging and Wi-Fi facilities.

Drop in the bucket

But the scheme, with 600 premium cabs, might “only have a limited effect to the whole taxi service market” that currently includes around 18,000 conventional taxis working the city’s roadways, the Hong Kong Consumer Council argued.

The Competition Commission of Hong Kong also suggested that the 600 vehicle limit was “unnecessary” and the low number is unlikely to have a “real impact” on the taxi market.

“The scheme is a ‘political compromise’ by the Hong Kong government to assuage consumer demand,” said Thomas Cheng, a former commissioner of the Competition Commission.

Calls to improve the city’s taxi service have intensified since ride-hailing startup Uber Technologies started to operate in Hong Kong in 2014. Despite operating in a grey area, more passengers have to use Uber over taxis, which are often accused of overcharging and flagrantly ignoring would-be passengers. The popular ride-hailing service provider remains illegal in Hong Kong as its drivers carry paying passengers without a hire car license.

Government an anti-competitive price fixer

Cheng also noted the new proposed scheme would be an extension of taxi regulations by the government. Fundamentally, the nature of taxi regulations themselves can be viewed as anti-competitive, with the government actively restricting output and fixing prices.

Under the new plan, the government would be able to clearly prescribe the service levels and set service standards through the franchise terms.

It suggests that the fare charged by these taxis be set at a level that is 50 percent higher than what ordinary taxis charge, with a flagfall of HK$36 compared with HK$24 currently charged by urban taxis.

Failing to meet the prescribed service levels or standards could lead to penalty or even revocation of the franchise, which will last for five years and will be non-transferable and non-renewable.

“Franchised taxis and ordinary taxis will have different market positioning in the public transport system, with the former being an enhanced complement to the latter,” the government said.

“Ordinary taxis will continue to constitute the vast majority of taxi services and their fare level is more affordable to the general public.”

A compromise that pleases no one

The plan has also met with opposition from the local taxi industry.

Hung Wing-tat, chairman of Hong Kong Taxi Council, said franchised taxis will bring unfair competition to the industry.

“The government does not help the industry, but kills off the motivation to revolutionize the trade. This is not logical,” he said.

Local taxi groups also said having different fare rates could divide the taxi industry and the scheme will marginalize existing taxis.