Strides Premier merger: Challenging for smaller players to remain amid decline in taxi industry, say analysts

SINGAPORE: The merger of Strides and Premier reflects the challenges smaller taxi operators face amid the decline of the industry and the rise of ride-hailing, transport analysts told CNA on Thursday (Apr 13). 

But the merger is unlikely to have an impact on commuters, as the new joint venture company would mainly seek to improve operating efficiency, analysts said. 

Transport operator SMRT, which owns Strides Taxi, announced on Thursday that Strides Premier will be formed to hold the merged business. The merger will take effect on May 1. 

The merger will see Strides Premier running a fleet of about 2,500 taxis, overtaking second-largest operator Trans-Cab, which has about 2,170 taxis. ComfortDelGro has the largest fleet in Singapore with 8,700 taxis.

CHALLENGING FOR SMALLER PLAYERS 

The merger comes amid the taxi industry being on the decline “for the last decade or so” due to the proliferation of ride-hailing platforms as well as the COVID-19 pandemic, noted Associate Professor Walter Theseira from the Singapore University of Social Sciences. 

In 2022, point-to-point transport trips recovered to 80 per cent of pre-pandemic levels, Senior Minister of State for Transport Amy Khor said in parliament in March. 

But the supply of point-to-point drivers has yet to recover in tandem with growing demand, said Dr Khor earlier in February.

"As the demand for taxis and private hire cars rebounds to pre-pandemic levels, the merger will help to safeguard the long-term interest of drivers and passengers, as well as enhance efficiency," said SMRT on Thursday. 

Similarly, Assoc Prof Theseira who teaches economics believes the merger isn’t about “reversing the taxi industry” or the decline in taxi fleet size, but rather to “improve operating efficiencies”. 

“This kind of consolidation makes more sense than, for example, SMRT just choosing to buy a couple thousand more taxis itself. Because if you do that, you’re going to compound the potential problem of oversupply. It makes more sense to just absorb a smaller competitor,” he said. 

“But what that means, I think, is that SMRT doesn’t actually see there is value in expanding the total fleet size of the industry dramatically.” 

That said, many of the small players have been looking to exit the taxi industry for “some time”, Assoc Prof Theseira believes.  

“The reason why those smaller players are there is that about 20 years ago, the industry was liberalised, and there was this move to try to encourage more contestability and more options for the taxi industry. And things worked out for a while,” he said. 

“But I think many of these smaller players never really were able to achieve a scale that would make a lot of sense in terms of the operations, being able to economise the cost and so on.” 

With the rise of private hire vehicles, therefore, these smaller players realised they were “doing worse and worse”, but “couldn’t make an exit” from a declining industry, added Assoc Prof Theseira. 

These companies probably “couldn’t find any takers or the prices that they were offered or talked about weren't very attractive, given what they had spent to build the business”, he suggested. 

Acknowledging that the industry has reached a point “where the fortunes are reversing somewhat” and “things are stabilising”, he pointed out that smaller players thinking of making an exit “might as well do it now” as “this may be the only time where (they) get a relatively favourable price for the assets (they) have”. 

Echoing his sentiments, Associate Professor Raymond Ong from the National University of Singapore said it would be challenging for smaller companies today as ride-hailing has “a much larger market share” compared with traditional taxi companies today. 

Moreover, he highlighted, the size of ComfortDelGro’s fleet exceeds the combined size of its competitors. 

“By merging Strides and Premier, … this also essentially gives them more bargaining power, in the light that most operators – be it taxi or bus or ride-hailing companies – are moving towards cleaner energy sources and electrification,” added Dr Ong, who researches transport infrastructure. 

“PRETTY MUCH ZERO” IMPACT FOR COMMUTERS

On the ground, the merger would unlikely result in huge changes to taxi availability or fares, said Dr Ong.

He pointed to what he believes is the “main mode of taxi booking” for Strides and Premier cabs at the moment – the Grab app. In this sense, he does not believe things will change for commuters. 

Likewise, Assoc Prof Theseira believes the market impact for commuters is “pretty much zero”, because the move doesn’t change the total fleet size in the taxi industry. 

“(The merger) reduces the number of operators, but actually commuters have never paid attention to who is the operator. … We generally just pick whoever is the next taxi to come by, so it's not actually relevant for us,” he said.

As for fares, Assoc Prof Theseira does not see anything “changing dramatically” as a result. The industry practice has been that the leader – ComfortDelGro in this case as they own the largest fleet – “tends to be the first one to make a fare revision and everyone else just follows after”, he said.

There is unlikely to be any impact on ride-hailing fares or platforms as well, as neither Strides nor Premier control a private hire app, he added. 

MODE OF OPERATION SIMILAR, FEWER CHOICES FOR TAXI DRIVERS  

Drivers, too, are unlikely to face issues due to the merger, because the new company would “keep everything similar to the previous companies that the drivers were working with” in the short term, Dr Ong believes. 

“The main difference is that the merged company would give the management a much better economy of scale, as the fleet is going to be transitioned to hybrid or electric vehicles. 

“Now, when they transition to hybrid or electric vehicles, the drivers can expect to see some changes to the rental rate. But for the mode of operation in existing vehicles, I don’t think we will see a lot of changes.” 

On the other hand, Assoc Prof Theseira does not think taxi drivers are “going to be happy about this” merger as it “reduces availability of choice”. 

“If you are interested in being a taxi driver, obviously it’s better for you with more taxi rental operators out there. Because then you have a variety of choices; if you don’t like what (one is) offering, you can go to (another one),” he told CNA. 

“But the fewer players are out there, the fewer choices you have. I think they would recognise this cannot be good for them in terms of the competitiveness of rental offerings.”