I first moved to Singapore in July 1997 from London. The move was a step up in lifestyle. It was not only because of the food and the weather.
The taxis in Singapore could be summoned through satellite technology. You could call the Comfort hotline and mention your location (let’s say UOB Plaza). The satellite would then find drivers in the vicinity. You would get the number plate of the taxi.
This may seem common today, but it was rocket science in 1997. No other city in the world had a booking system that was even remotely like Singapore’s. In London, taxis were still booked using radio technology. In New York, you had to wave taxis off the street.
Many of the taxi drivers spoke in Malay, which was then more of the city’s lingua franca. The drivers knew the roads better than today’s GPS-powered drivers.
Today’s taxi riders face a different problem. There are not enough taxi drivers. Covid forced many drivers out of the industry. Drivers were watching Netflix during the lockdown. Some fell into hardship as they could not service the debts they took to operate taxis.
Shortage of taxi drivers
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Ridership has now returned to 90% of pre-Covid levels. There are about 600,000 daily trips. There are less than 10% less active drivers today than in 2019.
The result is that riders are left waiting for long. The average waiting time during peak hour in Singapore has doubled since 2019. The driver shortage has extended to ride-sharing apps like Grab, Gojek and Tada.
The shortage of drivers has led to higher costs. A platform fee of 70 cents per ride booked on Comfort app has been levied. All three ride-hailing firms have extended their temporary driver fee.
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It often costs twice as much to use taxis or hail rides today compared to 2019. This is problematic in a city where taxis are a form of public transport.
There are some intrinsic issues to Singapore’s driver shortage. Taxi drivers have to be over the age of 30. Singapore is one of the few rich countries that restrict taxi licences to its citizens. In New York and Paris, taxi drivers could come from Senegal to Bangladesh.
Enter robo-taxis
The solution to the shortage of drivers may not be more human beings. Singapore may be poised to make a technology leap. It would be similar to the introduction of satellite booking of taxis in the mid-1990s.
Readers of a certain age may remember the 1980s TV show Knight Rider. The lead character was called Michael Knight and he rode a robotic car called Knight Rider.
The technology in that show may now be available. Robo-taxis that can be summoned by the touch of a button are operating in America.
San Francisco has approved two robo-taxi companies. This city had mobile phones, computers and the internet before the rest of the world. It is now charting a new course for robo-taxis.
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Waymo, the larger of the two, is a subsidiary of Alphabet. It operates on a similar pricing to ride-hailing companies like Uber. There is one big difference. You do not have to tip a driver.
Cruise is backed by General Motors and has had some teething problems. One of its robo-taxis blocked a music festival. Another got stuck in concrete and caused a traffic jam.
Despite these teething problems, the technology has deep-pocketed backers. The two companies could lose over US$3 billion ($4.1 billion) in the next four years. The losses are from the development cost and operating expenses.
Blowing up billions to build a robotaxi fleet is not the only option. Breez Mobility founded by Ben Shah in the US has planned a cheaper alternative. These vehicles are smaller and cheaper robo-taxis that operate on college campuses and golf courses. Breez Mobility could become cash flow-positive sooner than Waymo and Cruise.
Singapore’s operators could use these robo-taxis. A viable alternative to the shortage of drivers seems to be in sight. There could be efficiency gains for Grab, Comfort and GoTo. The three stocks are down by an average of 34% this year. Grab and GoTo have bled their balance sheets with incentives for the drivers. Robotaxis would remove the need for them. Taxis without drivers may take these stocks further than the market expects.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era. He does not hold any position in the stocks mentioned in this column, except for ComfortDelGro C52 . This column does not constitute investment advice of any kind
