Define your generation here. Generation What
Can white taxis survive in an app-based transportation market?
White taxis attempt to chart their space by suggesting legislative changes, joining new apps
 
 
 

Black and white taxis were the only available taxicab option in Cairo, until white taxis came along 10 years ago. But just a few years later, Uber and Careem both allowing ride hailing via smartphone apps appeared, rapidly taking over the market and threatening the future of white taxis.

This brief story of the evolution of market competition is accented by a number of other factors, from judicial orders to legislation. The future of hired cars in Greater Cairo is currently playing out on at least two other levels: a Supreme Administrative Court ruling expected to be issued tomorrow an appeal of the Court of Administrative Justice (CAJ) verdict issued on March 20 ordering the government to halt the operations of transportation network companies (TNCs), and only the most recent in a series of judicial orders and Parliament’s approval of the Law Regulating Passengers’ Urban Transportation Using Information Technology, a reportedly challenging piece of legislation tackling issues with no legal precedent that awaits President Abdel Fattah al-Sisi’s ratification.

However, there is another side to the future of this vital segment of Cairo transportation: white taxi organization. As Uber and Careem’s popularity rise, questions have emerged surrounding white taxis’ ability to compete in the app-based transportation market and whether or not they will move beyond the individual-driver model of ownership and service provision toward a more networked approach.

Investment and organization: The history of white taxis

Uber and Careem’s apps offer users a number of features that white taxis do not. Through them, a passenger can view information about the driver and the car they drive, measures that are meant to guarantee safety. They also calculate trip fares, eliminating the potential for conflict and the trouble of haggling. Plus, customers can rate drivers through the apps.

Only a company with unlimited investment funds can manage these additional services, however, and the more fragmented and largely individual-driver focused model of white taxis precludes cabbies from providing the same.

A dive into the history of how white taxis came to replace black and white taxis points to financial impediments on their ability to innovate. A Finance Ministry fund, the Vehicle Scrapping and Recycling Program (VSRP), was launched in 2009 to replace traditional taxis (the black and white) with white taxis. Under the program, the government bought old taxi vehicles for LE5,000 each and offered their owners five-year loans furnished by several government banks that were involved in the project to buy new taxis. As part of the program, vehicles manufactured over 20 years ago were no longer eligible for license renewal.

White taxis took over the city. Old taxis gradually disappeared from the streets, and the handful of black and white vehicles that remained operative, unmaintained and without meters, were no longer able to compete.

The number of white taxis operating in Greater Cairo rocketed to 50,000, according to the VSRP, out of the 114,000 cars registered as cabs that the Central Agency for Public Mobilization and Statistics (CAPMAS) recorded in 2016. But it was not long before the project became embroiled in a series of crises that were detrimental to its existence, not unlike the black taxis that preceded them.

The first challenge that faced white taxi drivers was to make the five-year payment installments they received through VSRP in the face of new fuel prices and a surge in costs of parts, in addition to the overall increase in the cost of living since the time the project was launched. Many drivers have also raised the issue of manufacturing errors, which made maintenance all the more costly.

Another obstacle was placed in the way of the already-struggling drivers: the Interior Ministry’s Traffic Department necessitated that drivers submit a letter from the bank when renewing their annual taxi licenses to show that they had been paying installments regularly. Only recently did a group of white taxi drivers manage to obtain a judicial ruling abolishing that requirement.

On the road toward an app

Several apps have emerged over the past few months offering white taxi services to passengers in the hopes of competing with Uber and Careem without exceeding the taxi fare set by the Cairo Governorate.

Professional Taxi is one of them. Akram Youssef, who works for the company, told Mada Masr that, similar to Uber and Careem, the app which was launched in late December provides the passenger with information about both the driver and the car they are driving.

Professional Taxi, according to Youssef, also allows users to rate trips, among other services that are meant to make it more competitive.

“We looked at the problems customers face while using white taxis, and we worked on a solution that meets their needs,” says Youssef. For customers who do not own smartphones, a hotline was set up through which requests can be placed, warranting that a taxi would arrive half an hour later.

“Smart Meter” is another feature developed by Professional Taxi, whereby a driver can directly enter the phone number of a non-app-using customer, and the app can then start to calculate the fare. At the end of the trip, the app sends the total fare along with the trip data to the customer’s via SMS. If the driver does not have enough change, the remainder is credited to the customer’s account, a feature that is also offered by Careem.

Approximately 5,000 Cairo taxis are registered on the app, according to Youssef, but only 3,000 customers use it. He says the app makers plan to expand to Alexandria, Suez, Ismailia and Port Said within the next four months.

Taxi Care, which was launched in September, maintains a smaller driver base. There are about 1,000 drivers working with the company, and the app has approximately 12,000 users, according to Taha Sayed, CFO of the mother company that owns Taxi Care.

In exchange for using the app, a 15 percent fee is added to the trip fare, as set by the Cairo Governorate. Sayed tells Mada Masr that the company offers WiFi inside the vehicles, adding that a plan to install surveillance cameras to protect customers’ safety and security is in the pipeline.

Vehicles registered through both Taxi Care and Professional Taxi must be new, well-maintained, air-conditioned and carry valid licenses. Their drivers must hold valid driving licenses and be willing to learn “a new attitude.” In that regard, Sayed says, “We provide drivers with regular training and prepare them to interact differently with clients.”

Obstacles

The makers of Professional Taxi and Taxi Care have made an effort to find a place for themselves in the transportation market by employing apps, but their road is not free of obstacles. Both developers struggle in the face of insufficient funds for advertising and the meager number of drivers who currently use their applications.

On the other hand, Uber Egypt employs over 50,000 drivers. The company invested LE250 million in the Egyptian market in 2016, according to Emil Michael, Uber’s senior vice president of business. Careem’s driver pool is as big, having secured at least US$350 million in investment.

Mada Masr spoke to Madbul Abdel Moneim, the founder of the Taxi Driver Association and a Taxi Care user, about the ability to attract capital and clients. “The company still cannot afford to spend enough on advertising. Moreover, we are unable to compete with Uber and Careem’s regular promotions. We are just taxi drivers, after all. We cannot compete with multinational companies backed by mega investments. They are taking over the market. This is why we are demanding support from the government.”

Abdel Moneim is one of the drivers who filed a lawsuit before the CAJ, in which they demanded that Uber and Careem’s services be halted. On March 20, the court ruled in the drivers’ favor on the grounds that the two companies are operating in violation of the law.

“As long as Uber and Careem are operating, we will have no chance. Private vehicle drivers will always get the biggest slice of the cake,” says Abdel Moneim, explaining that riders prefer private cars over taxis.

Uber and Careem drivers who operate private vehicles do not bear the same costs as taxi drivers, which include taxes, insurance and licensing fees, which are higher than those required for issuing private driver licenses.

Taxi drivers, according to Abdel Moneim, are required to renew their licenses every three years. Between payments toward health check ups, drug testing, membership of the General Union of Land Transport Workers, and social insurance, renewal fees amount to LE3,000. On top of that, the vehicle’s license must be renewed annually, costing a driver or owner approximately LE5,000, according to Abdel Moneim.

On the other hand, an average private driver’s license could cost around LE100 and is valid for 10 years. A license for the most high-end private cars costs no more than LE2,000 and is valid for three years.

The Law Regulating Passengers’ Urban Transportation Using Information Technology includes an article that requires drivers working with Uber, Careem and similar ride-hailing companies to display the company logo on their cars. Citing the disparity in licensing costs, taxi drivers raised objections to this article. They demanded that private cars that operate under Uber and Careem be required to acquire taxi license plates in a March community dialogue meeting led by Parliament’s Transportation Committee and attended by white taxi drivers as well as representatives from Uber and Careem. Their proposed amendment was rejected by the committee.

Alaa Mohamed, the secretary of the White Taxi Drivers Independent Trade Union (WTDITU), sheds some light on another disparity that renders white taxi drivers unable to compete with Uber and Careem.

“In 2009, the white taxi fare was LE2.5 for the first kilometer, with an added LE1.25 for each subsequent kilometer. At the time, 80-octane gasoline cost 90 piasters per liter. Now, a liter of fuel costs LE3.65 four times the 2009 prices but the taxi fare is only LE5 for the first kilometer, with LE2 for each subsequent kilometer. It does not match the hike in fuel, parts and oil prices, not to mention car prices.”

This, for Mohamed, is the reason taxi drivers choose to disable their meters or tamper with them. Private companies, on the other hand, raise trip fares during rush hours and late at night — an option that is not available to white taxi drivers.

The low fare discourages taxi drivers from joining the ranks of their peers at Uber and Careem. WTDITU head Amr al-Attar told Mada Masr that should taxi drivers decide to work for one of the two companies, a percentage of their already limited profits would be deducted.

Article 12 of the Law Regulating Passengers’ Urban Transportation Using Information Technology requires licensed companies to devise a policy to incorporate taxis into their systems within three months from the date the license was issued.

To counter the lack of marketing funds, Professional Taxi, which has 5,000 taxis registered on its app, relies on word of mouth. “Customers find out about the service from the taxi drivers themselves,” says Youssef, who rolls out promotions to attract new customers, such as offering 25 percent off fares for the elderly and people with disabilities, and 50 percent off all trips during holidays.

However, Youssef fears that his venture will meet the same end as Easy Taxi, which was forced to close its business in Egypt several years back because, according to him, it failed to compete with private transportation companies.

Besides marketing, licenses is a challenge for Taxi Care, the other wishful competitor. Sayed told Mada Masr that although the company has been in business for more than seven months, it only received a license from the Cairo Traffic Department recently. “Licensing takes months, even though our operation is legal, as our vehicles are [licensed as] taxis, not private cars,” says Sayed, adding that the license needed for plastering promotional material on vehicles has yet to come through from the Cairo Governorate. However, he is hopeful about the forthcoming Law Regulating Passengers’ Urban Transportation Using Information Technology as he anticipates it will facilitate the process of licensing.

Before the law was approved by Parliament, the privately owned Al-Shorouk newspaper quoted Investment and International Cooperation Minister Sahar Nasr as saying that the law “ensures that Egyptian companies and small investors are incorporated into the system and prevents them from becoming reliant on foreign companies, thereby supporting small and medium enterprises.”

The law names the Transportation Ministry as the competent authority tasked with issuing renewable five-year licenses to companies operating in the information technology-based public transportation industry. According to the law, licensing fees will be calculated by the ministry based on the number of vehicles operated by agents of the company, with a maximum of LE10 million per license. The standards which vehicles must meet will also be determined by the ministry.

A taxi association

Before Professional Taxi and Taxi Care, WhatsApp Taxi, Al-Arabi Car and Wasalny were the alternatives to Uber and Careem. None of them gained much traction, however.

“Providing customers with a quick and decent service necessitates that we have enough cars to cover Greater Cairo. This, in turn, requires a substantial investment to market the app to taxi drivers and owners as well as consumers. Drivers cannot bear these costs,” says Attar. He argues that it is essential to establish an association for taxi owners to regulate the profession independently from the government.

Such an association would allow for improving the taxi system, explains Attar. It would be able to set safety standards, control advertisements on taxis, provide training, and employ apps similar to those of Uber and Careem.

While taxi drivers are already required to be members of the General Union of Land Transport Workers, the union includes drivers from all industries, not just taxi drivers, and therefore is unable to provide the needed support. The independent union and the several already established taxi associations, on the other hand, are more specialized, but their membership doesn’t cost much and their resources are too limited to enable them to push for change or protect drivers’ rights.

But Attar acknowledges that an association for all taxi drivers may only be possible through Parliament. In addition, the idea is at a preliminary stage. It is not clear, for instance, what the association’s policy toward drivers who do not own the vehicles they drive will be, and whether the association should be a trade union in the strict sense or also a provider of public transportation services.

Nonetheless, Attar says an association, with mandatory membership, is vital to develop the cab system in order to meet users’ needs while protecting the rights of drivers. He believes this will pave the way for competition against the forces of private transportation.

AD
 
 
Mostafa Mohie