Are app-based car rental businesses sustainable?

TL;DR – How long is the drive? 

App-based car rental businesses, or rather, what they term as tech startups, such as Uber, Grab and SixTNC have been disrupting the private-hire car industry globally for the last few years.

But how long do you think this will last?

With more and more findings revealing that such companies are making losses by the billions (though on paper it looks like they are “doing well” because of all the funds that they are raising) but are their business models sustainable in the long run?

I’m a big fan of such apps simply because of how convenient it used to be* and more often than not, the fare I’m paying is slightly cheaper than our good ol’ taxis. Especially after midnight.

*Used to be? –  I started using such apps circa 2012 where Grab was still known as MyTeksi and Uber only offers black cars instead of UberX. They were not as mainstream as it is now and there wasn’t as many drivers on the road as well but despite that, I could always get a ride within 4-5mins upon booking.

These days?

I’ll consider myself lucky if I can get a ride under 10 minutes.

Trust me, this is not just a one-time situation. The average wait time for a ride usually takes at least 8-12mins these days, from almost any location I must add. I have also spoken to many other users and they too face the same issues. Waiting time is getting longer and the quality of drivers is also getting from bad to worse. Some also voiced out that one of the many reasons why they initially prefer private-hire cars over taxis is because of the quality of drivers. They tend to provide better service and are more polite given that they have to maintain a certain rating. Sadly, this now seems like a distant memory for most despite the implementation of the Private Hire Car Driver’s Vocational Licence (PDVL) which is supposed to be a screening process for drivers before they get hired.

Nobody died and made me the king of the gig economy but I do feel that the existence of such companies should fulfil not all but at least one of the following three functions:

  • Profits for the organisation
  • Jobs creation
  • Helping society at large

Based on various reports, it seems that profit is off the table for now and we are not too sure when will these companies stop bleeding cash. No doubt that these apps did create some jobs for the people be it full or part-time work but are they happy about it? Did they really create new jobs or did they just evolve the current jobs (such as taxi driving) and give people false impression (and hope) that they now have new job options? Are these jobs even sustainable? If these jobs are not sustainable and not here to stay, the impact really doesn’t count, does it?

Screen shot of unhappy drivers from the National Private Hired Vehicle Association’s Facebook Page

When these businesses first started, like many other businesses, carrots were dangled to get partners (drivers) onboard. They were given various attractive incentives such as new drivers incentives and incentives pegged to the number of pickups within a certain time, number of trips made within the first few months etc. As more drivers got onboard, companies start to give the drivers fewer incentives and in words of some of the drivers I’ve spoken to during car rides, “incentives that are unattainable”. However, more incentives to riders (passengers) are constantly being given out, such as promo codes that give discounts of $3 to $5. We would imagine that with more riders, there would be more jobs and in terms provide the drivers with more business and thus more income, but apparently this doesn’t seem to be the case.

We admit that it is indeed a tough business trying to keep the drivers happy and at the same time managing their cost (or losses) of dishing out incentives to drivers and attracting new riders at the same time. Like every other business, you can’t be overpaying your staff while charging your customers too little. I guess the math behind making this disruptive business work ain’t as easy as what it first seems to be especially with all the competition these days.

The effects on society ain’t exactly rainbows and butterflies either. Since the day Uber started getting attention, countries have gone into protests and even even resorted to banning the app. Concerns such as safety, disruption to taxi companies, or even sharing of taxi stands have been brought up one time too many both in Singapore and around the world.

Not to mention how the media have chosen to cover certain news involving private-hire cars,

Recent headlines from The Straits Times

Are these headlines really giving context or do they have a witch-hunting and sensationalising intent? A car accident is a car accident, it’s sad, it’s painful but what does it make any real difference just because it’s a private-hire car? It can happen to anyone, thus the word accident. It can be any car on the road but somehow because it’s a private-hire car, it becomes a much bigger issue?

Let’s take a crack at this. For the typical person, we usually on the road I would say about two to three hours a day on average. We drive to work, to a few appointments, and then home. As for private-hire drivers, they are on the road almost 10 hours a day and thus, just based on hours – fatigue and other factors aside – their chances of getting into an accident are thus naturally much higher?

At the end of the day, business is business and it’s all about bottomline but if nobody is happy about how the money is being made and the support from consumers is slowly fading away, how long can this business model be sustained? Can they overcome these problems or are we seeing the end of these products in the very near future?



Author: Smith Leong

I'm a self-made thousandaire with a thing for tatts and a loud mouth you probably don't care about. Also blogs at www.smithankyou.com


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