Taxi companies get green light to introduce surge pricing

Taxi companies get green light to introduce surge pricing

The move comes amid stiff competition from private-hire car drivers under third-party apps like Uber and Grab.

SINGAPORE: Taxi companies can now introduce dynamic fares, popularly known as surge pricing, for trips booked through mobile applications after getting the green light from the authorities.

The Land Transport Authority (LTA) and Public Transport Council (PTC) said in a joint statement on Friday (Mar 17) that they have accepted the proposals from taxi companies and ride-hailing platform Grab.

“The companies have informed LTA and PTC that this will be introduced as an additional option for commuters to book a taxi, on top of the current metered fare taxi bookings,” the statement said. “We have no objections to the proposals."

With surge pricing, the cost of a taxi trip booked through a mobile app will vary according to demand. This means that commuters will pay more during peak hour and high-demand periods, and pay less when demand is low.

Grab, currently the only platform offering this price model, has announced that it will launch a new service with surge pricing for taxis with fixed, upfront pricing. This differs from its current taxi-booking service, GrabTaxi, which charges metered fares.

Taxi services are regulated by LTA, although taxi companies have been able to set their own fares since 1998. However, in 2016, the companies were required to standardise some parts of the fares.

LTA said it will amend the third-party taxi booking framework to allow Grab to provide dynamic fares for taxis. Under the current framework, third-party taxi booking service providers are only allowed to set booking fees, not full fares.

The move by taxi companies to implement surge pricing comes amid stiff competition from private-hire car drivers under third-party apps like Uber and Grab. Both Uber and Grab have similar surge pricing schemes for private-hire cars.


Earlier this month, Singapore’s largest taxi operator ComfortDelGro said it was looking to revise the fare structure for its Comfort and CityCab taxis. On Friday, it said it is "pleased" that authorities have given taxi operators the flexibility to introduce surge pricing but said it did not intend to roll this out for now.

"Instead, we will introduce a flat fare structure which will be similar to our taxi metered fares for trips booked via our mobile applications. This new fare option will roll out in about two to three weeks' time," ComfortDelGro said.

Second-largest taxi operator Trans-cab, along with smaller operator Premier Taxis, have said they will introduce surge pricing in March to help their drivers earn more while still meeting peak-hour demand.


One expert said the move towards dynamic pricing is necessary. "In Singapore, we are used to thinking of taxi services almost as an extension of our public transport services, but this is actually not the way taxi services operate in many other cities throughout the world," said Dr Walter Theseira, a senior lecturer at the Singapore University of Social Sciences' School of Business. "In most cities, taxi services are for occasional use. (They are) luxury transportation services for most people.

"But in Singapore, they've acquired this character of being something in between mass public transport and private transport. Of course, that is partly because in Singapore, cars are expensive.

He added: "This is a move a bit more in the premium direction, but I think it is in some ways a necessary move, because the cheap taxi model has only been sustainable in the past because driver wages were cheap. But Singapore is not a developing country any more. Drivers too, should expect to be earning a decent wage and so I think the pressure to raise wages and drivers along with the price of everything else means that we should be perhaps accepting that taxis may cost a bit more."

Source: CNA/cy