Uber can drive a taxi revolution in Hong Kong

Albert Cheng says the car-hailing app can only be good for customers and drivers in the long run, as more competition will mean improved services and cheaper licences

PUBLISHED : Sunday, 23 August, 2015, 9:07am
UPDATED : Sunday, 23 August, 2015, 9:07am

A recent sting operation by Hong Kong police saw five Uber taxi drivers arrested and their cars detained for illegal use as vehicles for hire. The police also raided Uber's offices and detained three staff members.

The business model of the car-hailing app, which combines information technology with quality service, has disrupted the traditional taxi service and has been well received by users around the world. Uber's service is now available in more than 300 cities, and the company is valued at US$50 billion.

Uber has operated in the grey legal area and caused controversy in many places, since it apparently threatens the vested interests of the traditional taxi sector. Taxi drivers in some regions, in response, have staged large-scale protests and even filed a class-action lawsuit against Uber.

The high-profile action of Hong Kong police is an obvious move to safeguard the vested interests of the taxi sector, because if the service continues to eat up market share, prices of taxi licences are certain to plunge. The government has not issued new licences since 1994, contributing to an unreasonable surge in prices. A taxi licence now costs over HK$7 million, meaning the 18,000 licences currently in the market are worth about HK$126 billion.

Local passengers have been put off by taxi drivers' poor attitudes, refusal to take them to their destinations, unreasonable fare charges during bad weather and other undesirable behaviour. If the traditional taxi service had been satisfactory, passengers might not have used car-hailing apps. In contrast, Uber not only makes use of its mobile app to connect drivers with passengers, but also charges the exact fare shown. In some regions, it also provides passengers with information such as drivers' appearance, health conditions and vehicle details.

If the traditional taxi service had been satisfactory, passengers might not have used car-hailing apps

In the face of competition, the taxi sector should increase its competitiveness by improving service standards and providing more information instead of demanding the government strengthen regulation or kick competitors out of the market. At the end of the day, it's up to the consumers to decide whether the service is worth the money they pay. It would not be a bad thing if charges were laid against Uber, which has expanded its business not only to Hong Kong but also on the mainland and in Taipei. If Uber were to win the lawsuit, the case would be looked on favourably elsewhere.

A friend, Chung Po-yang, introduced DHL's express delivery services into Hong Kong in 1972. However, the government claimed the services were in breach of the Post Office Ordinance and therefore hurt the interests of Hongkong Post. Charges were brought against DHL, but the company won the case. The government was made to open up the delivery service market and, since then, the sector has flourished and become one of the major pillars of the local service industry.

The DHL story shows that any industry should not stick with an old model of success. It should seek to innovate and embrace the challenges of the times.

Prices of taxi licences have dropped by half in Canada since Uber entered the market. The same will happen in Hong Kong sooner or later, and this will be good news for taxi drivers, more of whom will have the chance to become owners. These drivers who already have licences should think of selling now, while the price is still high. Then if the court rules in favour of Uber, they could set up their own fleet of cars and join Uber. Even those who have no intention of getting a taxi licence or forming a fleet could benefit from becoming an Uber driver, with better income and no longer having to suffer the high rental rates imposed by taxi companies.

Uber's car-hailing service will never replace the taxi service entirely. But it will increase competition, force the taxi sector to reform and revitalise the market. Car hire services will be revolutionised. Drivers will become bosses. Customers will enjoy better service. People with disabilities will find hailing a vehicle easier. And taxi licence holders will no longer be the only beneficiaries in the business.

Albert Cheng King-hon is a political commentator. taipan@albertcheng.hk