CHALLENGING FOR SMALLER PLAYERS
The merger comes amid the taxi industry being on the decline “for the last decade or so” due to the proliferation of ride-hailing platforms as well as the COVID-19 pandemic, noted Associate Professor Walter Theseira from the Singapore University of Social Sciences.
In 2022, point-to-point transport trips recovered to 80 per cent of pre-pandemic levels, Senior Minister of State for Transport Amy Khor said in parliament in March.
But the supply of point-to-point drivers has yet to recover in tandem with growing demand, said Dr Khor earlier in February.
“As the demand for taxis and private hire cars rebounds to pre-pandemic levels, the merger will help to safeguard the long-term interest of drivers and passengers, as well as enhance efficiency,” said SMRT on Thursday.
Similarly, Assoc Prof Theseira who teaches economics believes the merger isn’t about “reversing the taxi industry” or the decline in taxi fleet size, but rather to “improve operating efficiencies”.
“This kind of consolidation makes more sense than, for example, SMRT just choosing to buy a couple thousand more taxis itself. Because if you do that, you’re going to compound the potential problem of oversupply. It makes more sense to just absorb a smaller competitor,” he said.
“But what that means, I think, is that SMRT doesn’t actually see there is value in expanding the total fleet size of the industry dramatically.”
That said, many of the small players have been looking to exit the taxi industry for “some time”, Assoc Prof Theseira believes.
“The reason why those smaller players are there is that about 20 years ago, the industry was liberalised, and there was this move to try to encourage more contestability and more options for the taxi industry. And things worked out for a while,” he said.
“But I think many of these smaller players never really were able to achieve a scale that would make a lot of sense in terms of the operations, being able to economise the cost and so on.”
With the rise of private hire vehicles, therefore, these smaller players realised they were “doing worse and worse”, but “couldn’t make an exit” from a declining industry, added Assoc Prof Theseira.
These companies probably “couldn’t find any takers or the prices that they were offered or talked about weren’t very attractive, given what they had spent to build the business”, he suggested.
Acknowledging that the industry has reached a point “where the fortunes are reversing somewhat” and “things are stabilising”, he pointed out that smaller players thinking of making an exit “might as well do it now” as “this may be the only time where (they) get a relatively favourable price for the assets (they) have”.
Echoing his sentiments, Associate Professor Raymond Ong from the National University of Singapore said it would be challenging for smaller companies today as ride-hailing has “a much larger market share” compared with traditional taxi companies today.
Moreover, he highlighted, the size of ComfortDelGro’s fleet exceeds the combined size of its competitors.
“By merging Strides and Premier, … this also essentially gives them more bargaining power, in the light that most operators – be it taxi or bus or ride-hailing companies – are moving towards cleaner energy sources and electrification,” added Dr Ong, who researches transport infrastructure.