Our group will be analysing the taxi industry and ride-sharing services
industry; Grab and Uber.
Taxis are a popular form of public transport in Singapore, with
relatively low fares as compared to those in cities of developed countries such
as Amsterdam, Los Angeles, Chicago and New York City. The taxi number ratio is
currently declining with the rise of Grab and Uber, private-hire cars and
tighter emission regimes with at least Euro 4 standards.
Uber Technologies Inc. is a global taxi technology company which was
founded in March 2009 in San Francisco, California, United States and operates
in 633 cities worldwide. Uber drivers use their own cars although drivers can
rent a car to drive with Uber.
Grab (formerly known as GrabTaxi) is a Singapore-based technology
company founded in 2012 that offers ride-hailing and logistics services through
its application in Singapore and neighbouring Southeast Asian nations.
2. Demand for Taxis and
The demand for taxis has been decreasing, while the demand for
ride-sharing services has been increasing. The graph in Appendix 1 shows the
change in demand for taxis and ride-sharing services. There are a few
determinants of demand behind this change in demand for both services. The
decrease in demand for taxis will cause a leftward shift in the demand curve
for taxis while the increase in demand for ride-sharing services will cause a
rightward shift in the demand curve for ride-sharing services.
2.1 Money Income
Compared to public transport, ride-sharing services like Grab and Uber
are normal goods while public transports are inferior goods. As seen in
Appendix 2, Singapore’s median gross monthly income from work of full-time
employed residents has been increasing. In 2016, the average monthly income of
a full-time employed resident is $4,056. The increasing money income of people
leads to an increase in their ability to purchase normal goods. This in turn
increases the demand for normal goods and decreases the demand for inferior
goods, which in this case demand for Grab/Uber increase and demand for public
transport decrease. This contributes to the increasing demand for ride-sharing
services like Grab and Uber. This is shown in the graph in Appendix 3.
2.2 Price of Related Goods
Taxis and ride-sharing services are substitutes since they can be used
in place of one another and this is why they have an inverse relationship. As
shown in Appendixes 4 and 5, regular rates for ride-sharing services like Grab
and Uber are at least 10% lower than those of taxis. Most of the time,
commuters will opt for the cheaper option, thus increasing the demand for
ride-sharing services and decreasing the demand for taxis. The decrease in
demand for taxis is reflected in the nearly doubled unhired rate of 9.1% in the
first five months of 2017.
2.3 Tastes and Preferences
Another reason why commuters are moving towards Grab and Uber is because
of how convenient it is. As stated in Article 1, by using those ride-hailing
apps, commuters can easily summon a chauffeured car right in front of them
within minutes, with just a few taps on their smartphones. Compared to hailing
a taxi from the streets or using a booking hotline, making use of Grab/Uber to
get a ride is much more convenient and simple. In this modern-day context,
everyone wants everything to be simple and fast and this is why commuters
choose Grab/Uber instead of hailing or booking a standard taxi.
Furthermore, ride-sharing services like Grab and Uber often have
promotion codes which are emailed to their users, sent to users through a group
chat in Telegram or found in respective apps. (Appendix 5)
2.4 Number of Buyers in the Market
There are increasingly more buyers in the ride-sharing service market,
which in this case refers to the increase in commuters using Grab/Uber. In
addition, Grab and Uber offer first-time user promos and this adds on to its
attractiveness. Grab offers $10 off for first-time riders while Uber offers $15
off. This attracts more commuters to start using these ride-sharing services
instead of taxis. Thus, demand for ride-sharing services increases but demand
for taxis decreases.