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Who is going to win the battle for urban transport?

The individual transport market is going to change within the next few years. This is caused by shortages of parking spaces, increases in car insurance and numerous promotions of service distributors. People like using mobile applications for ordering taxis due to:

Speed. Thanks to the GPS module, the application will locate us instantly and the order takes a few seconds,

Confidence. Have you ever made a mistake in giving the location to the dispatcher – for example, Świętojańska Street instead of Świętojerska Street in Warsaw? – although it’s just one kilometer, taxi drivers can get angry with the customer, the dispatcher, or their own mistake. Such a mistake means wasted time and a dissatisfied customer.

Accuracy. The application will show where the taxi driver is, which allows you to assess when to leave the club or restaurant – this is a particularly valuable function during winter or hot summer.

Have you noticed cars branded with iTaxi, MyTaxi, or even both at the same time? In the traditional system, the taxi company forced taxi drivers to pay for brandidng. Modern operators pay drivers several hundred zlotys a month for brandidng, because that means advertising their companies.

Are local applications doomed to fail?

MyTaxi and iTaxi are no different from an ordinary taxi company, apart from giving the drivers more freedom. Including the possibility of calling or texting the driver directly. This makes it much easier to pin-point each other’s location and determine when the customer will be ready – taxi drivers value it highly. At the same time, more and more small companies are developing their mini-taxi-ordering apps. Such solutions may suit their existing customers, but that does not extend the companies’ customer base. Among others, due to small marketing budgets assigned to local applications.

  1. Arek, taxi driver. From iTaxi to MyTaxi
    Do you remember how iTaxi boasted that you can drive a BMW at the rate of PLN 2 /km. This is what the situation looks like a year from this campaign. See the example of Arek.

This driver worked at iTaxi for a year. During this time, the company promised to pay off the leasing for 3 years – PLN 3,200 per month. However, after a year it withdrew its offer and the taxi driver was left with a large lease installment to be repaid every month. Additionally, iTaxi increased its commission from 10% to 16% (as a comparison, the commission at MyTaxi is about 10%). Arek moved to MyTaxi. He doesn’t complain now, but he doesn’t feel treated fairly. Arek’s story teaches us several lessons.

In business, you have to read contracts. The taxi driver was promised that iTaxi would pay his lease for 3 years, but he did not notice that the contract can be unilaterally terminated.

Size does matter

In order to change customer behavior through technology, it is extremely important to have the funding guaranteed for many years. The bigger the business, the more capital is needed. New technology-based businesses create a new niche and inherently seek monopolization. Uber offered customers PLN 50 for the first trip. MyTaxi cut prices by 50% for two months. iTaxi also encouraged customers with discounts, but we may suspect that they used up their investment capital. Unfortunately, in order to win the market, you have to run at a loss for many years. One of MyTaxi’s investors is Mercedes Benz, a company that has many times greater investment reserves than the owners of iTaxi. Of course, this does not doom the market’s second biggest company to failure. If there is Coca-Cola, there is also Pepsi.

Is Uber a taxi company?

Uber is a global player. It has enormous capital. At many startup conferences its representatives lobby that Uber is a shared economy and that they are changing the image of urban transport. But Uber is already a corporation that is struggling to adapt to local conditions. And local cities give priority to taxis (e.g., bus lanes). Additionally, Uber has the highest margin and is more expensive than some local companies (many corporations in Warsaw charge less than PLN 1,50 / km). Many people say that Uber has not caught on due to the fact that it does not pay taxes in Poland and that it has has unfriendly regulations. It would not matter to people if it charged PLN 1 / km.

Cars rented like city bikes

Initiatives similar to the city bikes rental have recently appeared on the market. Unlike in taxis or Uber, there is no driver. This carries a number of risks but has one advantage – it is cheaper (about PLN 1 / km)

The main disadvantages are the distance from the nearest car and its condition. And the problem is not the technical condition, because it will be regularly checked, but the cleanliness of the car and ease of starting it up. The success of city car rental companies will depend on whether the rental car network will be as dense as that of city bikes. If one has to walk to reach the nearest car for over 5 minutes, they will choose the tram, bike or taxi.

How are we going to travel around the city in 2020?

Predicting the situation in a few years’s time, we can be almost certaint that there will be 2-3 more players on the taxi company market. Polish taxi drivers are forming associations to seek solutions that will allow them to stop the outflow of customers and drivers to mobile corporations. Perhaps in a few years’ time a solution will be developed uniting Polish companies thus protecting them from bankruptcy. Uber will expand in places wher taxi service is expensive. In such cities as Wrocław, where taxis charge the maximum rates (PLN 3 / km), Uber is a viable alternative. When it comes to carsharing without hiring a driver, the success of this idea will depend on whether the customer will reach the available car in less than 5 minutes and whether they will leave it clean for subsequent users.

About the author:

Krzysztof Wojewodzic, a PhD in management and an investor. He advises company management boards on business models and the use of new technologies in business development.

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