Australian taxis are now free to set their own fares – will that save the taxi industry?
Effective October 2017, Australian taxis are free to set their own fares, although some details of this desirable regulation may still be in the offing. Among the changes being introduced may be some added protection for customers. The Andrews government is also likely to consider the next stage of taxi reforms when the cabinet meets next. These reforms could allow networks like 13CABS and Silvertop to compete with them on fares offered to customers. The new laws are aimed at bringing significant relief to the taxi industry since the industry would now have a level playing field, particularly because the ride-share companies are now legal.
The first stage of taxi industry reforms saw the taxi license prices taking a nosedive. With the second stage of reforms, it is expected that the customers will now have more options as well as reduced fares. The changes will also enable customers to get an estimate of fare before they choose a particular cab. The Taxi companies can either offer a flat rate for the trip or rate per kilometre travelled. Customers who use taxis frequently may also receive competitive packages from one or more providers.
These changes are expected to bring great relief to all stakeholders including the small to large taxi companies like Taxi Maxi Melbourne and ABC Taxis Sydney. Ride-sharing is a new trend that is shaking up the industry on a global scale, and Australia is no exception. Typically, ride-share companies are able to offer price about 20% less than traditional taxis and this, in turn, helped them gain a strong foothold in every market they started operations. Uber now operates in 300 cities covering 6 continents. Interestingly, the company started with just two cars and a desk on the streets of San Francisco and as we step into the final months of 2017, one million Uber drivers are ferrying passengers every single day.
The Andrews government has already announced a relief package amounting to $250 million as compensation for the Australian taxi industry under the industry shake-up and the report from taxi statistics showing huge disparities in rates among states. The government expects to fund this largesse through a $1 levy from every trip that taxis of all descriptions from February 2018. It remains to be seen whether the taxi industry passes on the burden to the customer or absorbs it. In all likelihood, Uber might absorb the levy rather than pass it on to the customer, particularly since the company is already reported to be building large war chests to fund such eventualities.
The reforms also include a reduction in insurance premiums up to 40% for taxis which is expected to provide a competitive edge to all stakeholders including passengers. The changes now being introduced have also been welcomed by most participants in the taxi industry. However, that does not mean everyone is happy now, and it is business as usual for the harried Australian taxi industry. The taxi license owners will continue to hold their grouses, particularly since what was once considered assets with perpetual value addition would now be compulsorily acquired by the government. Understandably, the price at which the acquisition comes around cannot cheer the owners because the fancy price tags are now gone – gone forever. They also advance the argument that the $1 per ride being levied under the new dispensation will more than offset the proposed compensation for license holders and the government is thus making a profit from the move. On the other side, it is equally true that the government is foregoing millions of dollars in revenue that it was generating via the taxi license regimen.
The reforms presently in the pipeline may become law only in the New Year. It remains to be seen how the reforms translate into better services for the passenger and more pro-active dispensation from the taxi industry.
Among the most contentious arguments against the ride-sharing companies has been the surge-pricing they adopt during peak demand periods. These companies argue that during the peak periods, a larger number of customers is after fewer cars. Surge pricing helps idle cars come out on the roads and pick up the passengers for the extra bucks that they gain. Further, there is nothing hidden from the customer, since the expected cost of the trip is known before the cab is booked and people always have the choice to wait for the fares to soften or look for an alternative. In many instances, the surge pricing does not remain constant across an hour and keep oscillating when more cars become available.
With these changes, the Australian taxi industry will undoubtedly undergo a major overhaul. The customers, however, are expected to reap huge benefits from the new regulation, particularly because there will be significantly more options available. Customer preferences can also shift significantly since some of the new entrants will be providing newer, cleaner and more comfortable cars, as opposed to the not so affable cars provided by a cross-section of taxi operators today. Another concern that could possibly remain is how the new system addresses short distance passengers which most taxi companies tend to refuse. In most other cities outside Australia Uber is known to service short distances passengers with the equal enthusiasm shown to long distance trips. Ride-share also means two or more people sharing the same car to reach different destinations. Both passengers pay a pre-determined fare according to the distance they travel. But, the cab owner is at an advantage because he receives multiple payments to travel the same distance.