22 October 2018
Hong Kong needs to legalize ride-hailing services such as Uber to boost competition in the taxi industry and improve service standards. Photos: Reuters, Bloomberg
Hong Kong needs to legalize ride-hailing services such as Uber to boost competition in the taxi industry and improve service standards. Photos: Reuters, Bloomberg

Govt must open up the taxi market to competition

Hong Kong authorities keep talking about ambitious ‘smart city’ goals and the need to promote new technologies to improve people’s daily lives, but when it comes to real action on the ground they are falling woefully short. 

Nowhere is this more evident than in their handling of the issue related to mobile app-based car hailing services, with officials adopting a head-in-the-sand approach on the key new-age industry.

Failing to legalize ride-hailing services like Uber, officials have allowed operators running traditional taxi fleets to have a monopolistic grip on an important public passenger transport system in the city.

The interests of the traditional taxi players, an industry dominated by a small group of license owners who control around 18,000 cabs on the street, seem to have been placed above those of consumers, who are desperate for more choices and better service.

Since Uber entered the market in 2014, the government has never accepted its status as a transport service provider. Officials have declared the service illegal, and more than 20 Uber drivers were arrested over the past year on the ground that they were operating without a permit.

The lack of legal status notwithstanding, Uber has maintained its operations in the city and drivers continue to join its platform to provide service to the public. 

Underlying the company’s confidence is this simple fact: Uber has gained fans because of its better service and its technology-driven business model, such as the use of smartphone app to call for a ride and allowing passengers to settle the fare by credit card.

Uber provides a completely mobile and cashless ride for Hong Kong people with a range of vehicles, including electric cars such as Tesla and a choice of 4-seater and 7-seater models, in contrast to regular local taxis that are still powered by LPG and have only 4 or 5 seats.

If there are more than 5 people in a group, they will need to hire two taxis and spend more on the transport. Also, taxi drivers are reluctant to accept non-cash payment as they try to avoid leaving behind a record of their income, with an eye on the tax man and perhaps even the license owners.

With the government limiting the number of licenses at the 18,000 level for a long time, the industry has operated in a virtual monopoly.

There are about 9,000 license owners, many of whom see the taxi license as more of an investment tool rather than a service obligation. Due to the limited number, a taxi license is now worth about HK$6 million on the market. The license has no condition on service quality and commitment.

Sadly, despite the rising value of their asset, the license owners feel no responsibility to invest more to improve the taxi services.

If the government lets the taxi industry monopoly to continue, Hong Kong is bound to fall further behind other cities in the world in terms of smart traffic development.

Authorities need to realize that a completely offline taxi operation would do nothing to contribute to smart-city development.

Traditional taxi license holders as well as taxi drivers have treated Uber as their enemy, as they fear that additional hire vehicles brought onto the road will affect their business and personal incomes.

The argument from the vested interests is understandable, but it is perplexing why the government seems to be accepting such a narrow vision.  

There are broader issues at play here. As Uber officials have pointed out, services such as theirs can be a solution to urban problems.

Ride sharing, for instance, can help alleviate traffic congestion. Also, the services can enable retirees and people who want flexible working hours to earn some money.

The fact is that Uber is more than just a competitor to taxis; it can serve as a platform to better utilize vehicle capacity in full so as to reduce the number of cars on the road during the peak hours.

That, in turn, can create huge economic benefit to the community. The data that Uber and other similar services generate from the rides can be put to use by authorities to map out transport plans for the future.

Given these factors, some lawmakers have called on authorities to legalize ride-hailing services, noting that a policy shift can protect passengers’ interests as well as bring competition to the taxi industry.

This week, the Consumer Council also stepped in, urging the government to legalize services like Uber so as to provide consumers a real choice.

Lack of competition in the market would only mean problems such as poor service quality, the watchdog’s chairman, Wong Yuk-shan, said.

The taxi operators, however, refuse to acknowledge the truth that their service standards are found wanting. Taxi drivers, instead, have accused the Consumer Council of being unfair to the industry by calling for legalization of ride-hailing services.

Unveiling a study on the e-hailing market and taxi services, Wong suggested that the government should amend regulations to allow firms like Uber to operate legally, but subject to stringent rules.

Officials must adopt a progressive approach and create a level-playing field for e-hailing services and taxis, the consumer watchdog said.

A beginning could be made by easing the rules related to the current private hire-car permit system to allow e-hailing vehicles to step into the market.

Authorities, meanwhile, must step up enforcement action against errant taxi drivers, slapping stricter penalties on those who overcharge or refuse passengers.

Looking at the industry, it is not just the taxi drivers who are to blame for the deteriorating service quality. The government and the taxi license owners also bear responsibility.

Now, given the advice from the Consumer Council, it’s time authorities woke up and legalize services such as Uber to usher in real competition in the market.

But the question is: Will they rise to the challenge?

Stay tuned. 

– Contact us at [email protected]


EJ Insight writer

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