DR MIKE GALVIN: Taxi trade survival beckons but change is needed

The gradual reduction in restrictions on our freedoms will I am sure we all hope lead to a gradual recovery in business levels. But this recovery probably comes at what really is a watershed for the taxi industry.

The prospect of taxi driver badges reducing to below 20,000 is a statistic or two away (20,587 last week after a further reduction of 32), vehicle licences are already at levels not seen since the 80’s and still dropping (13,714 a drop of 11 in a week), the well-intended ULEZ measures where maximum vehicle ages are reduced over a short period of time together with the ageing driver community many of whom are unlikely to invest in a new ZEC taxi means that the number of taxis is a year or two, at most away from hitting 10k. So, should anyone be bothered? Don’t less taxis mean more work for the survivors? I seriously doubt it… surely Sage’s law (supply creates its own demand) kicks in at some point!

Looked at clinically, taxis in London clearly face an existential challenge. This is not some old timer crying ‘the game is finished’ the situation is clear to anyone who does ten minutes of research. The systemic weaknesses together with political interventions will, unless someone, somewhere does something about it, mean that a way of life, an important service, a great employment opportunity and public choice will be removed from London. Covid, has I think we can all agree hastened the downturn but it is not responsible for it. That die was cast in 1998 (PH Licensing) and was barely discernible during the first ten years as transition began due to a buoyant economy, after transition the pace began to quicken as corporates moved from radio taxi circuits to private hire and from 2015 began to gather serious momentum as ride hailing crossed the Atlantic and rocked up in London. The commercial response from the taxi industry has been muted in many respects. Whilst politically strong and never fearful of putting their money where their mouth is to go to law thanks to the LTDA, LCDC et al the industry has lacked any real commercial or marketing direction.

The radio circuits, once mighty have diminished and largely disappeared, ComCab being the last man standing. The London Taxi Board, long gone along with the benefits of the manufacturer, big fleets, radio circuits, driver organisations and the regulator admittedly operating in their mutual and vested interests but where it really mattered together coordinating enough actions to make an important impact. Over the period of the early twenties the trade continued to increase prices whilst its competitors reduced prices at such a level that many are now lower than before minicabs were first licensed in London. Taxi costs have increased as has congestion and the number of journeys has reduced. Any business faced with lower priced competitors, increasing costs and reducing sales would be looking at a strategy for recovery, to regain lost ground, to encourage customers back and to increase supply. To date if that is happening it is not very obvious and frankly not very successful.

The crossroads have been reached – so what is everyone else doing?

Let’s look at the transport industry and what is happening elsewhere? The Government has just announced a huge shake up of rail, active transport is in vogue, petrol and diesel (especially diesel) are being demonised, electric vehicles (EV) are seen as the future, hydrogen gets only passing comment and car clubs are beatified which is curious as isn’t a car always a car? Micro mobility is on the way in and private car ownership is expected to reduce… but will it? Public transport in London will get a fillip when the long-awaited cross rail system goes live – yet more competition. Meanwhile the smart money is on commuting getting back to 50-60% of previous levels due to the Covid/Zoom experience. Foreign travel appears to be a year or two away from getting to being anywhere near previous levels. Will government move from its, and previous administrations’ mantra of spending billions on roads and millions on public transport? And if not, where will the big shift to public transport rather than private car usage come from? The Government constantly announces ever more challenging green targets – with respect announcing is the easy and cost-free bit, delivering is the tough and expensive bit. Will they achieve the targets or be long gone with another administration left to explain why the challenge wasn’t met? What damage will be done in the process to this and other industries? And importantly for this article what role will taxis play?

Environmental damage is not only caused by miles driven, producing and disposing of vehicles also adds immensely to the waste of the earth’s resources, to landfill and to pollution. Less individually owned cars and more shared resources are clearly part of the plan but however good the plan is, will it actually materialise? To do so requires huge cultural change. Cultural change is acknowledged to be the most difficult change to achieve in any environment. Cultural change is exhausting, it is not about laws it is about hearts and minds. It takes forever. Once the early adopters have invested in a bike and a lycra outfit or bought their electric car, every next step is tougher. Announcements and press conferences garner some support but it is small, moving the great mass from where they are, generally from where they broadly want to be to somewhere they really don’t want to be, that they perceive they would hate is tough and political cycles don’t align with the task. Small steps, picking low hanging fruit, gently pushing the boundaries is the normal and normally the most successful approach. But this is a government in a hurry, if we believe the science rightly so, so if moving from where we are now to a green and pleasant land is the goal where do taxis fit in?

Close your eyes and imagine Utopia

One of the tactics that is frequently taught at business schools in universities when faced with a seemingly impossible task is to imagine where you are now, and if all obstacles were removed how you would get to your solution, your utopia. Having done that, you are encouraged to look at every obstacle and think about how you could remove them, move them, manage them out or if needed go around them. So, if we look at the taxi industry through this prism, what is it that is needed – electric vehicles – give every cab driver one, congestion – remove it, pricing – lower costs/create more trips/generate more revenue, increase supply to provide a better service, operate right across London to broaden appeal, bring in technology you get the picture. The next step is always about innovation – stop solutionising with the old constraints as the reason (aka excuses) not to do anything new – innovate, be creative, think the unthinkable.

Does it all sound a bit scary or a bit risky? I think it does but will doing nothing be better? Less risky? Less scary? And importantly more successful?

So where will this fulcrum for action, for innovation and for survival and optimistically growth and success come from? Isn’t it easier to moan, blame TfL, Uber and anyone else who comes to mind? Is the answer really to gradually drift away from the trade and to watch a once great industry crumble and go the way of many other trades and industries?

Why did the taxi industry work? What stops it working now?

In its heyday the taxi industry (for the record I would pinpoint this as the 80’s and 90’s) was somewhere that legions of people made their home, they did The Knowledge in a reasonable time, often worked part time whilst employed ostensibly full time as printers, market porters, firemen and the rest. Some were made redundant as industries diminished and/or disappeared and migrated to working full time in the cab. During times of plenty they provided additional supply which was welcome and easy to absorb. Costs and income were broadly in synch.

The saying that cab drivers did not retire they just faded away was a truism. Many full timers bought their own cab, many didn’t. Part timers and the elderly took a cab for a couple of days per week or did a deal with a musher. In other words, there was flexibility and choice and the trade could peak and trough broadly in line with demand. Radio provided jobs in, jobs home and a welcome second iron in the fire. So, what has happened?

As journey volumes have reduced, as competitors have cut prices and as congestion has increased individual fares have reduced the competitive position, licensing has evened the field from a safety perspective in the public’s eyes and the cost to income ratio has changed for the worst. As ‘freeholders’ see their cabs no longer licensable due to reducing maximum ages another door closes. As The Knowledge has extended to the same duration as a Master’s Degree and a seemingly respectable private hire industry has developed the new blood has dried up or been diverted. So as a taxi driver what can you do about it? As an individual there is not much that can be done but this was always the case. The co-operatives that formed in this industry that founded associations, radio circuits and developed industry leaders were responsible for the growth and development of the industry and it is no surprise that the demise of some of these has led to the downturn in the industry.

A new dawn or a gentle sunset?

The real value of an opportunity is actually recognising it. As we shake out from the torpor of Covid-19, as the Government struggles (as it will) to paint the UK green, as transport providers look for door to door solutions, as the Mayor tries to clean up London’s air quality and get accidents (KSI’s) to zero where is the taxi industry, surely it is able to provide at least some of the solution(s)? Does the industry wish to remain the squeaky wheel, the people who always say no, the people who block up the streets or will they recover the authority and credibility of yesteryear and get on board? Be seen as part of the solution not part of the problem? Will the leaders of the industry be freed from fighting domestic battles and internal challenges to focus on real industry problems knowing that they have their members support?

As volumes reduce, supply becomes sparser, the behaviour this encourages is to use an app rather than wander the streets forlornly looking for a taxi. Less business equals less taxis and ultimately less taxis equals even less taxis, less journeys and less taxi drivers!

So, I guess we have to ask, do people still want a knowledgeable driver? An entertaining journey? The privacy and anonymity of a taxi? Will they pay a little more for the experience? The answer I would suggest is probably. So how do the taxi trade tap into this prospective group of users? How do they expand that group once they successfully tap in? How do they make the industry viable again? It’s not by doing what has been done recently is it?

Could there be the dawn of a new age circuit capable of generating corporate business again? A fleet of electric taxis available for hire by the day? Could the number of journeys increase to cover off a reduction in prices to once again get somewhere near competitive – I know this is contentious but there is a premium for instant availability from street and ranks but it has to get somewhere near the competition. And which parts of the trade has the clout to join with LTDA, LCDC et al and tackle congestion? Is it unthinkable that another transport provider could be the answer?

Survival beckons but change is needed

Anyone who sees the demise or extinction of taxis as being good for other parts of the transport sector especially the transport sector is… what is the polite word? Naïve. It won’t mean one more job for any provider it might actually mean the whole industry shrinks a little. Why? Why because we all like choice, we use a portfolio of transport and if choice goes and our personal portfolio shrinks we start to look for alternatives.

So, here’s the exam question – can the taxi industry in London survive? The logical and emotional response is surely… Absolutely! A great brand, a good service, and 360 years of experience and a great vehicle is a marketeer’s dream. The Taxi industry can survive and whilst it does need to become greener, more ubiquitous, take a view on pricing and be more willing to say yes hop in! There is a future. Technology will also be a key ingredient and there are already plenty of digital solutions available for it to compete.

It is not all about being the cheapest and people do pay more (or less) for different services. The evidence for this is that if this were not the case the taxi industry would have ground to a halt many years ago as it has been at the top end of pricing for decades. Having said that a pause on price increases might pay dividends. I am not suggesting competing with minicabs on price but how much further up the pricing continuum does anyone think taxis can go before choking off all demand?

Often compared with ‘turkeys voting for Christmas’, increasing supply has been anathema to the industry for decades… BUT… when taxis were at their busiest the numbers of taxis and drivers were at their largest. Sage’s law kicks in, plentiful supply creates its own demand. When services are reliable i.e. you can get a cab in a matter of minutes people with a liking for taxis will persevere. So how do you get supply, you get

The Knowledge back to when I and many others did it, it took me I think 15 months, some geniuses did it in nine months many did it in a year. I like every other driver of my vintage had a great knowledge when we got out, quicker doesn’t mean lower quality.

Also, however it is argued technology is here and it is great. Practically no one wants taxi drivers who have to set their satnav every time they pick up a customer but let’s not ignore it either, shouldn’t that feature to some extent as part of the knowledge along with a real USP the provision of transport to the disabled community? This paragraph will raise blood pressure all over London BUT if there are better ideas get writing and if you feel things will just get better on their own… well good luck with that. And if you are amongst that group that actually like driving a taxi, that are pleased and proud to be a London Taxi Driver and wish to stay one for many years to come then you need to start thinking about preserving this industry.

Frenemies

Whether you like the Mayor or not, no one can deny he has a point. Improving London’s poor air quality is a virtuous goal. Afterall who suffers more from poor air quality than professional drivers? Who can defend 45k people dying each year from poor air quality?

EVs might not be the whole answer but the new cab is a joy to travel in. Isn’t it time that an industry champion did a deal with LEVC and started to rent them to drivers whose cabs have been sold or are too old? Couldn’t a few strategically placed garages with swish pick up and drop off processes (ever been to Orlando? Look how easy it is to pick up and drop off your hire car) and decent car parking facilitate and make more rentals available? Perhaps there is an argument for some fiscal stimulation here?

Instead of seeing platforms as enemies, wouldn’t a more enlightened industry see them as potential demand partners? Many of these companies want to be platforms not operators so there is opportunity for operators to work with platforms and drivers to sign up with more apps and just pay as you go with no commitment. Trust will be hard to establish, to maintain and ultimately to deliver real partnership but the current marketplace is far from easy so maybe it is worth the risk.

Corporates used to be the big opportunity for Taxis. They could be once again with green credentials, screens, reputation and everyone’s harking for tradition. But drivers have to be more willing to cover this work and not drop them for street hail whenever it rains. When I was a young operations manager at Computer Cab we pulled our hair out every morning in the SW looking for coverage. If a customer has booked a cab the night before and it doesn’t turn up you have lost him/her for the rest of the day, week, month or worse! Likewise, if taxis group in a smaller and smaller area of central London and a few suburbs, and ignore the rest of London it ain’t going to get any easier. Density is important but also geographical spread otherwise you end up as the Fiakers of London rather than a viable transport solution.

Challenges mount but so do opportunities

The economics of airports are becoming dubious with the proposed Heathrow charge so taxis may be forced to be more geographically dispersed albeit maintaining enough critical mass to be reliable and provide a viable service.

The new vehicle is a real strength. Private Hire are going cheaper and smaller as they move to EVs yet the new cab is a very nice experience and clean. People will migrate to that. Drivers needs to match the quality of the vehicle so an effort to dress better and be seen as real professionals.

Fairy tales and happy endings are what your mum taught you but with a great reputational platform, a brave operator to provide the vehicles, the strength of the trade associations to deal with the congestion, real engagement with the regulator to enhance supply and some commercial reality which may involve working with people that you may not have considered in the past I really believe recovery provides a significant opportunity to re-establish the industry. And if you don’t believe me and think it was all about Covid and life will return quickly to normal… be lucky!

Article written by Dr Mike Galvin - Mobility Services Limited