13 June 2005

Cabbies In Trouble

"They still charge ERP, but at least I save on petrol."


ST, June 13, 2005
More cabbies failing to pay rental

ON THE back of ballooning fleets and falling passenger numbers, taxi companies are facing a worsening problem of cabbies with bad debts.

Six of the seven cab companies here have been hit and, based on official figures, The Straits Times estimates that operators now repossess 1,000 cabs a year because of non-payment of rental.

That is about 5 per cent of all taxis on the road now.

ComfortDelGro, the largest taxi operator here with about 17,000 cabs, used to repossess about 50 taxis a month because of non-payment. The number has risen to nearly 70 recently.

'It is very difficult,' said cabby C. K. Chan. 'I know of drivers who collect only about $120 to $150 a day in fares. They cannot cover costs.'

Taxi operators act like car rental companies, leasing vehicles to cabbies. The drivers pay a daily rental of about $90, on top of about $40 a day for diesel and other outlays on things like carparks and car washes.

Ms Tammy Tan, spokesman for transport group ComfortDelGro, said: 'From January to May this year, a monthly average of about 30 per cent of our hirers owe an average of five days.'

A five-day delay in rental payment from one-third of its hirers translates to about $2.3 million.

Mr Johnny Harjantho, managing director of newcomer Smart Automobile, has also observed a worrying trend.

'There are cabbies who genuinely cannot pay, but we are coming across people who are out to cheat. They come in on a Thursday, pay a deposit of $1,000 and take a cab. We bank the cheque on Friday. When we realise the cheque has bounced on Monday or Tuesday, he is gone.

'By the time we find him, he would have owed us 20 days of rental. Some of them will say: 'Go ahead, sue me'.'

Mr Harjantho estimates that half the hirers of his fleet of 460 cabs owe between one and 30 days of rental. The company is forced to repossess 'a few cars' each week.

Unable to cope, companies sometimes turn to debt collectors.

Ms Priscilla Low, an account manager at debt collector Lousintan, said the company handles more than 20 cases a month for several taxi companies. Debts range from 'a couple of hundred dollars to a couple of thousand'.

'We work out payment by instalments over six months to a year.

'We have a 70 per cent to 80 per cent success rate,' she said.

ComfortDelGro has its own credit controllers, but would still like to see an industry blacklist of drivers with bad payment records.

Premier Taxis general manager Lim Chong Boo said the company had to slow down fleet expansion plans this year, to weed out errant drivers and bring its debt situation under control.

Cabbies say the problem is there is just too much competition.

According to Land Transport Authority figures, there are more than 21,400 cabs on the road today, 45 per cent more than in 1994. At the same time, taxi ridership has fallen. An LTA study found taxi rides fell 12 per cent to 827,000 a day during the 12 months up to March last year.

Coupled with a 40 per cent hike in diesel prices over the last year, that means cabbies' earnings have fallen.

In addition, a cabby who cannot find a relief driver often has to drive two shifts to cover his costs.

Mr Chan said: 'I have seen many drivers sitting in coffee shops, in a daze because they are so tired.'
So what do we learn from the article above?

Firstly, taxi companies don't make money out of passengers. Taxi companies make money out of taxi drivers.

Secondly, who are taxi drivers? Ordinary Singaporeans who can't get a better job and are suckered into driving a taxi.

Thirdly, Straits Times journalists are great at offering meaningless statistics to support poor conclusions. Take a look at this:

"According to Land Transport Authority figures, there are more than 21,400 cabs on the road today, 45 per cent more than in 1994. At the same time, taxi ridership has fallen. An LTA study found taxi rides fell 12 per cent to 827,000 a day during the 12 months up to March last year."

The journalist is trying to tell you that today, (1) there are more and more cabs and (2) fewer and fewer passengers.

To prove (1), he tells that that the number of cabs has increased significantly, between 1994 and 2005.

To prove (2), he tells you that from March 2003 to March 2004, the number of passengers has fallen.

But of course, those numbers are quite meaningless.

The number of passengers may have fallen in the period from March 2003 to March 2004 (a one-year period), but the number of passengers may well have risen sharply in the period from 1994 and 2005 (an 11-year period).

Alternatively, the number of cabs may have risen significantly between 1994 and 2005 (an 11-year period), but it may have fallen sharply between March 2003 and March 2004 (a one-year period).

Moral of the story? Statistics lie. Especially if the Straits Times is providing them. See here for another example. And here too.

The only people I know who consistently handle statistics as badly as the Straits Times are those banks, fund managers and insurance agents who throw a set of highly-manipulated numbers at you and tell you, "Yes! This is the best-performing fund. You must invest in it!"

15 comments:

Merv said...

Taxi fares will be raised.

Usually comes after such "news" articles.

So predictable.

Mr Wang Says So said...

Yes, I thought so too.

No doubt ComfortDelgro will say, "Oh, but oil prices have risen so much, our profits are really suffering."

Then someone will write to the ST Forum and point out, "But you don't pay for diesel. The taxi drivers pay for the diesel."

Then ComfortDelgro will say, "Oh, but don't you feel sorry for our taxi drivers? They work so hard and they earn so little."

Then someone will write to the ST Forum and point out, "Well, then, logically you should either stop expanding your fleet or you should charge the drivers less for rental."

Then ComfortDelgro will say, "Oh, that's not possible, we would make less money and be less competitive."

Then someone will write to the ST Forum and point out, "Actually, "competitive" means that you are able to provide the public with better services at a cheaper price. 'Competitive' does not mean that you keep charging higher and higher fares."

Of course, this final letter will not be published.

Next, the PTC will say, "Our taxi companies need to be more competitive, hence we permit them to raise taxi fares."

Amen!

Anonymous said...

I feel it is not fair to point finger at taxi companies for failing to reduce rental. The relationship between the cab driver and the company is a binding contract. The choice to accept or reject boils down to individual.

If one is so unhappy becoming a cab driver, he or she should not become a taxi driver in the first place.

Merv said...

Taxi fares are not regulated by PTC. Only buses/MRT.

But in any case, I expect to see more forum letters, editorials on the plight of the taxi drivers,

Before the eventual increase.

Mr Wang Says So said...

Dear Anonymous -

Sure. It is up to the individual to decide whether he wants to drive a taxi or not.

And do you know why in the past couple of years, you even get graduates driving taxis?

And if passenger numbers have indeed been falling, why do you think taxi companies like ComfortDelgro would want to keep expanding their fleets?

Something to do, perhaps, with making money out of the increasing number of unemployed Singaporeans forced to turn to driving a taxi?

And now the taxi companies have the problem of a small but increasing number of taxi drivers defaulting on their rental.

WHO caused this problem to arise? Really?

And is it fair that the costs of the problem are now passed to the fare-paying passengers? (I'm assuming that a fare increase is indeed on the cards).

Anonymous said...

The existence and objective of a business is to make money. Fleet expansion is just part of business expansion like any other business.

No Shareholders and directors would like to see their companies staying dormant forever. End of the day, one must understand that companies are sovereign and they have the right to dictate whatever terms and conditions subjected to the law of the country.

A person before becoming a taxi driver should be well aware of all the terms and conditions and must clearly knows what he is getting end of the day. Defaulting payment itself is wrong no matter what the circumstances are. This violates the terms in the contract.

Singaporeans have a choice to become a taxi driver or join other occupations just like whether one should take a cab or bus.

I may be harsh in my writing but this is how the economy works. If the price increase can make a taxi driver improve his earnings, i will gladly support it.

Mr Wang Says So said...

If you really want to talk about law and economics, then it is not true to say:

"Defaulting payment itself is wrong no matter what the circumstances are. This violates the terms in the contract."

From the economics point of view, violating the terms in a contract is not wrong.

From the legal point of view, violating the terms in a contract is also not wrong.

A breach simply means that you have to pay for the breach of contract. And payment is just an economic thing.

If I cannot pay (because I simply have no money), then I say:

"Okay, sue me. I can't pay anyway. I tried to earn a living out of a taxi, and I failed. And I have no more savings because before I became a taxi driver, I was retrenched and unemployed for two years."

So what is wrong about that?

And if the taxi company simply cannot recover its rental, well, then that is an example of a business risk materialising. There is no business without risk.

Where do I, in principle, disagree with what you say? Actually, I disagree mainly with this part:

"I may be harsh in my writing but this is how the economy works. If the price increase can make a taxi driver improve his earnings, i will gladly support it."

You see, if ComfortDelgro does what I think it will most likely do, then this will happen:

- The fare is increased. You pay more.

- It becomes more viable to make a living as a taxi driver.

- More people become interested in driving a taxi.

- Comfort Delgro seizes the opportunity to rent out more taxis (even if Singapore population does not grow and passenger numbers are still be shrinking).

- ComfortDelgro makes more money.

- Due to oversupply of taxis, taxi drivers again find it hard to survive.

- Repeat cycle. The fare is increased. YOU PAY MORE. Again.

Come to think of it, it resembles multi-level marketing. The guy at the top makes the real money. Everyone else is just getting ripped off.

Andy said...

Where is the much vaunted profit-sharing scheme when you need it? Guess it is only implemented when it "cut cost" ehh...

Anonymous said...

Mr Wang said:

And do you know why in the past couple of years, you even get graduates driving taxis?

And if passenger numbers have indeed been falling, why do you think taxi companies like ComfortDelgro would want to keep expanding their fleets?

Something to do, perhaps, with making money out of the increasing number of unemployed Singaporeans forced to turn to driving a taxi?


I think there may be another explanation for this: could it be that there is political pressure for Comfort Delgro to provide jobs for these unemployed? As a result, Comfort is forced to increase its fleet to make more jobs, with all its attendant consequences e.g. poorer taxi-driver income, defaulting on rental payments etc. Certainly a political decision made with economic consequences.

I do not intend this as a defense of Comfort Delgro however; as a public-listed company, they can only hold themselves responsible for their operations and fiscal situation.

The Straits Times article only cites Comfort Delgro; this is unfortunate, as there are a number of other taxi providers around (certainly a case of gross journalist bias). (Correction: brief mention from Smart Automobile, but no statistics cited, only an anecdote.)

Mr Wang Says So said...

The main reason why I find your theory unlikely is that other GLCs did not seem to hesitate to retrench.

SPH, SIA, DBS, for example, retrenched significant numbers of people in the past four years.

Beach-yi said...

It occurred to me that those who write anonmynously tend to be the worst in terms of making harsh comments. pfft. Boo.

Mr Wang Says So said...

Interestingly, in today's ST (14 June), there is another article whereby it is said that the number of taxi drivers rose only "slightly" from 2003 to 2005.

How quickly the Straits Times contradicts itself. ;)

ivan said...

Mr Wang:

Nice post. I spent quite sometime of my army life chatting with cab drivers (paid for by army), the life they lead is often unenviable and times are getting harder and harder for them. They are not faultless though, but it's very true that this 'ownership' programme taxi companies are touting are just a pretext for ripping their 'business partners' off.

It might be nice to note that in the uk it's very different (taxi drivers are slack and make comfortable livings). The get to choose from different schemes - one of which is where the taxi company just takes a cut of your takings often around 30-40%; This scheme might not be desirable if you work your socks off (which they don't), but yet it's the popular scheme (at least from what i gather). Of course the lower costs of living (assuming you earn in pounds) makes life easier as well, but that's expanding the ambit of this discussion too much.

Heavenly Sword said...

With all due respect to the various 'anonymous' bloggers, I would like to offer my 'Fish Tank Theory of Taxis' (or FTT), which (unfortunately) goes against what representatives of the 'taxi-businesses-can-do-anything-for-profits' school of thought are saying:

Think of Singapore as a fish tank, and taxis as the fishes. There is a limit to how many fishes you can put in the fish tank without making them uncomfortable. Sure, you might say that "it's my fish tank; I keep fishes for pleasure. The more fishes I keep, the more pleasure I derive". (The equivalent of saying, "Anything that increases profits can be done.")

Well, that's good, but have you ever spared a thought for the fishes? Can you keep adding fishes until all the fishes start suffocating (assuming there's no air-pump)? Even if there's air-pump, overcrowding is not good.

Taxi companies certainly don't have to care, as supporters of the 'profits' school of thought say; they are doing business. But wouldn't it be NICE if they cared?

huh said...

The only people I know who consistently handle statistics as badly as the Straits Times are those banks, fund managers and insurance agents who throw a set of highly-manipulated numbers at you and tell you, "Yes! This is the best-performing fund. You must invest in it!"

you missed out the biggest devil of all: the p.a.p. government - capable of logic-defying theories and creative accounting.