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Taxi war truce near, skeptics gripe

July 08,2019
A grand bargain is near in the war between taxi companies and mobility start-ups, and no one is likely to be very happy despite the official spin.

“We will announce a comprehensive solution around July to achieve a win-win,” said Kim Hyun-mee, the minister of land, infrastructure and transport on June 26 when asked about the conflict between Tada, the van-sharing service, and the taxi industry.

It was confirmed on Wednesday that the ministry has almost finalized a “win-win” solution and is currently consulting with related institutions, such as the Ministry of Economy and Finance.

According to the Ministry of Land, Infrastructure and Transport, three solutions have been proposed to achieve peaceful coexistence between the taxi industry and the platforms.

The first possibility is establishing a set number of licenses in the passenger transport business. That is, taxis and car-sharing services would compete for available licenses, a number capped and controlled.

Currently the number of taxi in the country totals 250,000, and around 1,000 Tada vehicles are operating.

Another solution is that used in the United States, where transport network business licenses are issued to non-traditional providers after the meeting of a number of criteria, which normally includes the holding of proper insurance policies.

Uber and Lyft are required to have licenses such as these.

The third option is to require the new services to acquire traditional taxi licenses, so if they want 100 vehicles plying the roads, they need to get 100 licenses.

“There will be a little change depending on how the consultation with the Ministry of Economy and Finance turns out, but the big picture is that the solution will follow the current trend of negotiation,” said an official in the Ministry of Land, Infrastructure and Transport who requested anonymity.

Skeptics question the plans. They criticize the government for creating another barrier to entry for the sector.

“The initial investment cost for buying or renting the license needed is a lot, and it is highly likely that there will be a limit on raising the number of cars, so the business value and potential will fall to a huge extent,” said Yu Jeong-whon, professor of Department of Transportation Systems Engineering at Ajou University.

“In this state, it is hard for start-ups to enter the market,” Yu noted.

“When the taxis are in oversupply and reducing the number of them is necessary, the license cap system makes no sense. If we follow the government’s solution, taxis or automobiles that operate like taxis will not reduce at all, and the oversupply will not be solved as well,” said Prof. Kang Kyung-woo of the transportation and logistics engineering department at Hanyang University.

In the discussion, one key constituency is missing: the traveling public.

“If we follow the government’s solution, the companies will highly likely raise the fee due to financial difficulty,” said Shin Hee-cheol, the head of the department for transportation research in the fourth industrial revolution at The Korea Transport Institute.

The number of taxis should be increased to a certain extent and a revolution on regulation should start so that value is created, but when there is a limit on this, companies will have no choice but to make up for the shortfall with higher fees.

Reactions are mixed.

The head of a start-up who requested anonymity said that at large, well-capitalized companies like Kakao Mobility, the government’s solution is seen as positive, but small start-ups are complaining as the barriers to entry are getting higher and they are likely to be left behind.

“It is necessary to take some time and collect data related to car-sharing and examine the satisfaction level of customers, and then gather a variety of opinions and finally come up with an effective solution,” suggested Prof. Kang Kyung-woo.

BY KANG KAP-SAENG [kim.heyu@joongang.co.kr]


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