26 October 2016
Hong Kong authorities have proposed to introduce premium taxi services as part of efforts to improve the overall service quality in the industry. Photo: Bloomberg
Hong Kong authorities have proposed to introduce premium taxi services as part of efforts to improve the overall service quality in the industry. Photo: Bloomberg

Premium taxi initiative: Too late, too little

As a frequent taxi user, I’m largely happy with the cab services in Hong Kong. Many people have complaints about the services, but it is unfair to blame the drivers alone.

The truth is that many of the problems are a result of a flawed system. The system is causing pain to taxi customers as well as drivers.

To improve the choices for passengers, the government has said that it aims to introduce premium taxi services through franchises.

The reform, I feel, is too little and too late.

If a person does not get paid in accordance with his/her service quality, the person doesn’t have any incentive to improve the service. That’s the issue faced by the city’s taxi industry.

Under the existing system, every ride is just a one-off service. Drivers won’t get rewarded more even if they provide better service.

For taxi customers, it’s very hard to tell which taxi is tidier and the driver more polite just from the appearance of the vehicle.

As drivers have lacked motivation to perform better, the service has deteriorated.

To address the issue, some drivers have figured out their own solution. They have formed a group that offers a 20 percent discount through a taxi hotline and trying to attract a number of frequent customers.

If they have regular customers, the drivers will be motivated to provide good service while also reaping increased revenue.

Some people might question as to why the taxi service in some foreign cities is better despite having a similar system as Hong Kong.

Well, as we all know, Hong Kong is a fast-paced and costly city. Taxi drivers here tend to get stressed due to the work and the high cost of leasing the vehicles.

By contrast, foreign taxi drivers are able to enjoy their jobs more even though they may be having lower income.

Also, some foreign cities have introduced partial reform in their taxi industry.

The most common practice is that local authorities grant three to five taxi operating franchises and let them compete with each other.

Given the competition, the taxi operators encourage their drivers to improve the service and gain customer loyalty.

The Hong Kong government now plans to follow suit. Authorities plan to grant three premium taxi operating franchises, with each licensee allowed to run 150 to 200 taxis.

The pilot scheme will be implemented for 4 to 6 years. Franchisees are allowed to determine fares on their own. The premium taxis will be differentiated from the existing 18,000 taxis in the city, and they are expected to provide better service at higher fare.

The initiative is aimed at improving the overall service quality in the sector.

The reform is in the right direction. But I’m afraid it’s too little and too late. Six hundred premium taxis will only account for 3 percent of the number of existing taxis available in the city.

Given the limited number, it may be quite difficult for people to find a premium taxi on the street.

The franchising model may help franchisees make profit, but it remains to be seen if the hired drivers will have sufficient incentive to improve the service.

Nowadays, many people are used to taxi-hailing apps like Uber and DiDi, whose services they can rate after each ride. The customer ratings would directly affect the popularity and income of a driver.

But will that be the same case with the drivers under the franchising model?

This article appeared in the Hong Kong Economic Journal on June 17.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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