Part D – Understanding and improving industry performance (PDF ...

KPMG argued that these restrictions reflect the notion
that hire cars serve a particular market segment and
should not encroach too far on markets supplied by
taxis. If these restrictions are removed, there will be little
difference between hire cars and taxis, apart from the fact
that taxis can be hired on demand, are subject to fare
control and have a distinctive livery.
It was further argued that there are some requirements
on taxis that prevent them from better competing with
hire cars. The requirement that taxis be hired on demand
– with certain limited exceptions – was said to mean that
taxi-cab operators cannot effectively differentiate their
vehicles by offering a higher quality, higher fare service.
Since 1999, the introduction of premium taxi services
has addressed this issue to some extent. As noted in
this report, for an additional fee of $11 ($10 plus GST) a
better quality of vehicle can be ordered through the major
Melbourne NSPs.
KPMG also argued that there were no economic reasons to
enforce higher standards of vehicles on hire cars:
If taxi-cab standards are considered the minimum
suitable to ensure the safety of passengers and
drivers, then we do not see any reason for higher
vehicle standards for hire-cars to be enforced. 111
The McQuillen review did not explicitly focus on the
differentiation between taxis and hire cars, but supported
open entry of vehicles at a ‘market price’. This approach
was adopted by the Victorian Government and remains in
metropolitan areas. 112
Effects of the regulations on competition
and performance
Hire cars have traditionally operated at the premium end
of the commercial passenger vehicle market, providing
a superior level of service at a higher price than taxis,
particularly in tourism and business sectors. Operators
rely on customer retention and personal repeat business,
placing greater importance on the reputation of their
company to attract clientele than in the taxi sector.
In recent years, hire cars have increasingly competed
in the pre-booked ‘ready to go’ market dominated
by taxis. This has been attributed to the expansion of
issued licences, stemming from the reduction in supply
restrictions, and more competitive hiring charges.
Dissatisfaction with taxi services has also played part.
Nonetheless, there are still some significant barriers
remaining to further competition: entry costs into the hire
car industry are over $100,000 (for non-hybrid vehicles);
it is more difficult to run fleets of vehicles; and part of the
market (MPTP users) cannot be served by hire cars.
It is apparent that there is potentially a much greater role
for competition between taxis and hire cars. Observation
of markets overseas indicates that in markets where
there are fewer restrictions on licences and vehicles, hire
car services have flourished.
• In New York, there are entry limits on taxis but no
limits on the numbers of livery vehicles. The inquiry’s
understanding is that there are some 40,400 private
hire vehicles operating in New York City (incorporating
the five boroughs) – more than four times the number
of yellow taxis. 113
• In London, there are over 50,000 registered minicabs,
against just over 23,000 ‘black cabs’ (which are also
not limited in number).
A further counterpoint here is Dublin: when entry into
the taxi market was deregulated in 2000, there was a
significant shift out of livery vehicles/hire cars (which
were previously unregulated) and into taxis, meaning that
the total number of vehicles per capita is similar across
Dublin, London and New York. 114
It is difficult to determine how much Victoria’s regulations
on hire cars cost the community. It requires an
assessment of how the hire car and taxi markets might
respond to amendments in the current regulations, which
requires a degree of conjecture. However, hire cars could
be expected to play a greater role in:
• Keeping taxi fares down, at least for pre-booked
taxi services
• Meeting peak demand for point-to-point transport
• Providing innovative services that focus on particular
market niches.
111 KPMG (1999), Op. Cit., p.100
112 In May 2002, the Minister for Transport announced a package of taxi
and hire car reforms following the National Competition Policy Review
of these industries. Legislation was amended in 2002 to reduce
barriers to obtaining hire car licences, whereby applicants no longer
had to demonstrate the issue of a licence was ‘in the public interest’
but had to pay a substantial licence fee
113 In December 2011, New York announced plans to issue 18,000
permits over three years that will allow livery vehicles to pick up street
hails in the outer boroughs and in upper Manhattan. See case study
in chapter 14 for further details on these plans
114 See Goodbody (2009), Op. Cit, p.13: “Whereas in 1991 there were
some 450 hackneys licensed in the Dublin area, this had increased to
3,500 by the year 2000.” By 2011 the number of hackneys had fallen
to 676: see www.nationaltransport.ie/downloads/taxi-reg/economicreview-spsv-industry.pdf,
accessed March 2012. p. 32
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