ComfortDelGro buying 500 more cabs amid perceived turnaround of taxi industry

Taxi giant ComfortDelGro has called a tender for the supply of 500 more taxis - just a week after it announced that it had bought 200 new cabs, its first purchase in 18 months. The listed transport group placed a tender notice in The Straits Times last Friday to source for 500 petrol-electric hybrid sedans.

The tender, which closes on 31^st May, is for replacement, as well as expansion of its fleet of around 13,000 taxis. The new vehicles are expected to be delivered over the next 16 months.

The move comes on the back of what is seen as a turnaround for the taxi industry, which had been battered by an unregulated surge in the private-hire vehicle population in the last four years.

In its first-quarter financial results announcement last Friday, ComfortDelGro directors said they expect the taxi business to stabilise with "the rationalisation of the competition landscape in Singapore".

Group Chief Executive Yang Ban Seng said, "With the reduced subsidy and incentives for drivers and riders by ride-hailing app operators, and the (Land Transport) Authority's review of regulations for private-hire vehicles, we believe that the competition will be on a more level playing field going forward. This is a positive development."

Last month, ComfortDelGro Taxi signed on close to 300 new hirers - nearly double the number in the same period last year. Its idle fleet is now below two percent, which a spokesman said was "negligible because we need some buffer" for cabs, which are in the workshop.

At the same time last year, the idle rate was five percent. Nonetheless, its fleet size has shrunk from a high of more than 17,000 cabs. Singapore's taxi fleet - which includes other operators such as TransCab and SMRT - stood at nearly 28,800 in early 2015.

But when the number of private-hire cars soared from an estimated 4,000 in 2014 - a year after Uber and Grab arrived - to more than 35,000 in 2016, the taxi companies started reeling. Today, the taxi fleet stands at an estimated 21,500, while the private-hire fleet stands at 47,000.

Meanwhile, analysts are becoming more upbeat about ComfortDelGro's stock. Phillip Securities Research has called a 'buy' for the counter, with an unchanged target price of $2.50. The stock rose from $2.19 on 7^th May - the day after news broke that it had started buying taxis again - to $2.35 yesterday.

Mr. Ang Hin Kee, Executive Adviser to the National Private Hire Vehicles Association, reckons that the industry is still not out of the woods. "Taxi operators cannot continue operating just by leasing taxis," he said.

"They need to roll out better solutions to attract commuters. They also need to have flexible rental models to attract taxis beyond just a one-hirer model." Mr. Ang, who is also the National Taxi Association's Executive Adviser, said the wake-up call from disruptors "must be heeded".