Insights on the Australian Taxi Industry

Victoria has 5250 taxi licences and the value of each licence is about $480,000. Interestingly, just about 8 businesses own anything in excess of 10 licences. Some of the large players in this sector include:

According to THE AGE, Gange Corporation who also own Silver Top Taxis, Cabcharge which owns 13 Cabs, the Granger family that is linked to 13 Cabs and Silver Top, John Vlassopoulos, the owner of Ambassador Taxi, Shehata family which owns ECM Taxi Brokers, Jim Dendrinos, who owns Bayside Taxis, Philip Humphreys who has links with Murrell Enterprises that dominate the taxi industry of Geelong as well as with Silver Top.

Around these giants, there are several hundred smaller players owning anything between 1 and 10 licences. Some of these small players are also owner-drivers who take to the road every day to earn a livelihood. Some licences also serve as an investment for smaller collectives with no effective involvement at all in the taxi industry.

There are about 15,000 active taxi drivers clocking about 35 million trips every year. The Gange family holds about 118 licences and are also owners of Silver Top which has a network of some 2000 taxis. The big and small players together are caught in the storm of reforms triggered by the entry of ride-share companies and are desperately fighting some rearguard action. The Gange corporation which is by far the largest, rakes in about $7,000 as the fee for network affiliation from nearly every cab that is in operation in Melbourne.

Cabcharge which also owns 13 Cabs has 24 taxi licences in its pocket in the name of Black Cabs and six more under the name of Arrow Taxi services. Cabcharge also has links with the Granger family which is a veteran player in the Australian taxi industry with 24 licenses under its belt.

The names we discussed so far also represent the old guard in the Victorian taxi industry. Newer entrants including Taxi Maxi have also managed to amass a large number of licenses. John Vlassopoulos is the owner of 31 taxi licences and Ambassador taxi brokerage apart from a driver training school in the northern part of Melbourne.

18 licenses stand in the name of Jim Dendrinos of Bayside taxis and another 18 licenses are owned by Shehata family.

In the wake of the disruptions caused by the entry of ride-share companies, an enquiry headed by Professor Allan Fels was ordered and his recommendations have far-reaching repercussions for the taxi industry.Among the highlights of his recommendations is the call to do away with all the restrictions on the number of licences and bring down the price of each licence to no more than $20,000 over a 5-year time frame. The professor has opined that this would help in freeing up the stranglehold of the licence holders over the industry and bring more cabs on to the street.

At present licences can be issued only by the state government which uses “public interest” as the yardstick. The enquiry is of the view that the restrictions on licensing have only helped in pushing up the licence value to unreasonable levels making them virtual cash cows for investors whose concern for driver welfare or service quality are questionable

A spokesperson for the Victorian taxi association insists that interests of the licence holders are not on top of its agenda an adding value to the licences was not the role of the association

Notwithstanding all the protests from industry stalwarts, the value of licenses has been falling like the proverbial nine pins. With much of the recommendations having been already implemented and more expected towards the turn of the year, the Victorian taxi industry is now staring at a situation where it cannot enjoy a monopoly or dictate terms to the harried customer. But then, the reforms would also potentially hurt smaller players and some of them could be heading towards serious financial hardship.

Was this disruption avoidable perhaps?

From semi-literate peasants to great humans who have scaled the pinnacle of academic success are aware that digital technology has severely impacted the way we live. Businesses are getting more and more conscious of this paradigm shift and struggling to tune in to the changing times. Perhaps, never before did the world witness such customer-centric focus putting so much of power in the hands of the individual who is finally contributing to the bottom line of the business. Ride-share is not a singular instance of technology crushing monopolies and mercilessly pulling the rug from under the feet of those of who enjoyed the fruits of monopoly for long. Monopolies invariably work to the disadvantage of the customer, and once the customer has an option to exit the clutches of the monopoly, the consequences for the monopoly holder can be disastrous.

Uber is now 5 years old and the Australian taxi industry woke up only about a year ago. Wasn’t that a bit too late? There were many lessons to be learned from the way ride-sharing was being accepted by customers elsewhere. Many factors that gained such a quick customer acceptance could have been copied by the Australian taxi industry, and undoubtedly the government too should have made significant contributions in revamping the sector to a degree where new entrants could potentially have scrambled for space. But, like in many other markets, these companies literally walked away with an instant customer base and it took only weeks before there was an avalanche of devout customers, to the significant detriment of traditional Australian taxi industry.

Ride-sharing companies, lead perhaps by Uber, have beneficially influenced supply as well as demand and in the coming days, similar technologies can potentially other segments of the industry, and particularly those that are significantly less focused on the most important ingredient of any business – the customer. Yet, Uber by itself is not a story of runaway success. It has and is experiencing its share of trials and tribulations and what is important is the way these companies are able to weather the storm and carry on unfazed.