Technology vs the taxi trade

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TECHNOLOGY VS

THE TAXI TRADE

Transportation network companies are seeing brisk business in the Middle East and, for the present at least, are co-existing with and complementing the traditional taxi institutions. But will there come time when e-hailing and ridesharing start to threaten the Karwas and the Dubai Taxis of the region, as has been in the case elsewhere around the world in recent months?

BY AYSWARYA MURTHY

Black Cab drivers in London go on strike against companies like Uber citing unfair advantages and non-compliance to regulatory rules.

AFP PHOTO / CARL COURT 60 > QATAR TODAY > AUGUST 2014

I

f you don’t drive in Doha, the two most frequent experiences you’ll have as you try to navigate your way around the city is either a forlorn vigil under the scorching sun waiting for a glimpse of green or being ambushed by touts offering rides, who often might be operating illegally.

After a few days of the former, the latter would start to seem like a blessing. Longterm residents will attest to the fact that the situation has remained unchanged over the years, despite mushrooming private limousine companies and increased numbers of Karwa taxis on the roads. It was reported in January this year that 4,000 Karwa taxis will be in service by the end of 2014 with two new franchisees set to launch 500 taxis each. The burgeoning population is swallowing up the supply and there is never enough to go around. The time is ripe for services like Careem and Uber.

Launched in Doha within months of each other, both these companies offer users the ability to hail cabs through their smartphones and make payments online. GPS based tracking, accountability and customer service add up to make these services a valuable little package. “A platform tailored to the underlying realities of the Middle East,” as Mudassir Sheikha, co-founder of Careem puts it. Why would anyone have a problem with this anywhere?

With the news of drivers of the iconic London black cabs going on strike to protest against services like Uber, the natural thought was: “here we go again. Another reboot of The Luddite Revolt”. This was, of course, a gross oversimplification and more research on this proved as much. Yes, technology was disrupting their way of life and easily replacing the ‘knowledge’ they had gathered over many years, but their core concerns were unfair competitive advantages and mismanagement by the

government authority, Transport For London, dubbed as Totally Failing London.

Though this was the most widely publicised incident, it was by no means an isolated one. Across continents, from Barcelona to Chicago, there were murmurs of discontent in the taxi industry. And Uber, that had come to represent the many transport network companies (TNC) that were becoming ubiquitous and witnessing unparalleled growth, was invariably at the centre of it all.

With the rapid expansion of TNCs in the region, should Middle East’s taxicab drivers start preparing for the inevitable? Should Uber and its ilk?

Well, no. Not yet, at least. Because the market is far, far from being saturated. The phenomenal growth of both Uber and Careem can stand evidence to this. Since its September 2013 launch in Dubai (which was Uber’s 40th city globally), the company has launched in Abu Dhabi, Doha, Riyadh, Jeddah and Beirut (by which time Uber’s global cities count had risen to 144). In Doha especially, their growth has been faster than in Dubai, because of the lack of public transport options (like the highly popular Dubai Metro) and difficulty of finding taxis in the suburbs, says Majed Abukhater, General Manager for Uber, Middle East.

Careem, after raising $1.7 million (QR6.2 million) in investment last summer, is now operational in eight Middle Eastern cities, servicing over 50,000 users through 2,500 plus cars, and is growing at 30% every month, according to Sheikha. It is dwarfed by the sheer volume of taxi usage, though; in Dubai alone, over 100 million taxi trips were taken last year. “The taxi industry in the region is big; people rely on them a lot and will continue to do so,” says Abukhater. “It’s not about us replacing them. The market is large and is set to grow so fast that there’ll always be enough room for all of us. It’s complementary rather than

"It’s not about us replacing them [the taxis]. The market is large and is set to grow so fast that there’ll always be enough room for all of us. It’s complementary rather than competitive at this stage."

MAJED ABUKHATER General Manager Uber, Middle East

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"As long we work with licensed taxi/ limo providers in our markets, we will not have to deal with the kind of strife that you are seeing in Europe and North America. The trouble starts when you start empowering your ordinary Joe to compete with taxis."

MUDASSIR SHEIKHA Co-Founder Careem

62 > QATAR TODAY > AUGUST 2014

competitive at this stage. It’s us making the market better together.” Hitherto, Uber has avoided encroaching on the taxicab market as the services they provide here cater to a narrow segment of customers. With Uber Black as their core product, they deal in luxury cars and a higher price bracket and hence don’t see taxis as direct competition. “We launched UberX only in Jeddah and Abu Dhabi. The difference is in the type of cars and the price point, which is slightly lower than Uber Black,” Abukhater explains.

UberX however, means different things in different cities and to get to the nub of the issue, it’s important to go behind the scenes first. Uber and Careem have very similar business models with a few differences; for example, the ability to pre-book taxis with Careem which isn’t an option with Uber.

“In all markets, we work with licensed limousine operators,” Sheikha says. “Once we sign a contract with a limousine company, we screen and interview their drivers, test them on driving safety, navigation knowledge, communication skills and customer service orientation and only give our devices to drivers that meet the standards.

And for providing the technology platform, doing sales and marketing, maintaining the infrastructure and offering customer service, we take about 20% commission from the fare for each ride.” Uber too works solely with limousine companies and not individual drivers, unlike in other cities like Paris where any private car owner with an insured vehicle and a driving licence older than three years can apply to drive for Uber.

Ridesharing, as this service is called, has the potential to turn the heat up on taxis, if and when introduced. Much of the gripe around TNCs globally is around this aspect of their service (in addition to other concerns like low fares and licensing). Sheikha believes that as long they work with licensed taxi/ limo providers in their markets, they will not have to deal with the kind of strife that we are seeing in Europe and North America. “The trouble starts when you start empowering your ordinary Joe to compete with taxis,” he says.

But ridesharing is currently not on the agenda for either company here. Abukhater says they are not evaluating the introduction of the service at this point because there is still so much to do with their existing product. And what with all the trouble they have faced in various cities during recent months over not following appropriate regulatory and licensing laws, they are being extra careful about compliance. A dicey

proposition when you consider how this may enable the rampant illegal taxi racket to come out of the shadows and pose as a legitimate competition to taxis. An interesting experiment is taking place in Dubai with Carpool Arabia, which launched a beta version of its website in February this year, and Dubai’s Road Transport Authority. How the service works (or doesn’t work) in tandem with the RTA’s Sharekni System, which was put in place to encourage carpooling while clamping down on illegal taxis, would probably set a precedence on how ridesharing is implemented in the region.

ANOTHER ISSUE TO CONSIDER IS WHETHER THE GCC POPULATION WOULD BE INTERESTED IN RIDESHARING IN THE FIRST PLACE, NOVEL AND PROFITABLE THOUGH THE EXPERIENCE MAY BE. “THE JURY IS STILL OUT ON RIDESHARING IN THE MIDDLE EAST,” SAYS SHEIKHA. “MOST OF THE GCC COUNTRIES, BARRING SAUDI ARABIA, DO NOT HAVE LOCAL POPULATIONS THAT WILL PARTICIPATE AND IT IS NOT CLEAR IF EXPATRIATES CAN PARTICIPATE LEGALLY. THIS ALSO REQUIRES AN ELEMENT OF TRUST IN STRANGERS WHICH IS MORE PREVALENT IN THE WESTERN WORLD THAN IN THE MIDDLE EAST.”

The taxi industry will, sooner rather than later, get with the times. The RTA has already introduced Smart Taxi, an app that can “e-hail” taxicabs in the vicinity. Part of Dubai’s Smart City initiative, the app will cover over 9,000 of these vehicles currently plying across the city. Across the region, there are a lot of opportunities in this space for tie ups between TNCs and taxis, like London’s UberTaxi which allows users to summon black cabs. Sheikha says this kind of “collaboration with the regulators to make our technology more widely available to other stakeholders in the ground transportation ecosystem” is one way they can help spin any resentment that might arise in the future.

“FOR US, COMPETITION IS YOU DRIVING YOUR OWN CAR. AND, ON A NICE DAY, YOU WALKING TO YOUR DESTINATION. COMPETITION IS ALWAYS GOOD, BOTH FOR OUR CUSTOMERS, WHO HAVE MORE CHOICES, AND US, BECAUSE IT COMPELS US TO CONTINUALLY IMPROVE AND INNOVATE,” ABUKHATER SAYS.

In Qatar, its unclear if Mowasalat is working on something similar for the Karwa cabs. But the private sector is already on it. Q-Cab, which is currently being incubated at Qatar Business Incubation Centre, will make getting hold of those notoriously scarce Karwa taxicabs easier, says Tariq Awadallah one of the founding members of of the start-up. With the TNCs that are already operating here and new ones like EasyTaxi rumoured to enter the market soon, Awadallah knows competition is going to be stiff. But either way, the demand is glaringly obvious and someone will have to meet it.

VALUE FOR MONEY KARWA TAXI FARES START AT

QR4

AND THE MINIMUM FARE IS QR10 NEXT CLOSEST OPTION IS CAREEM'S ECONOMY CAR WITH THE FARE STARTING AT

QR10

AND THE MINIMUM AT QR14

“Our plan is to directly sign on Karwa drivers (including those working for the franchisee companies) and select those who already have a smartphone so that they can start using the app to find customers,”

he says. At this stage he is not looking to deal with the legal issues and complications that might arise from entering into contractual agreement with companies. “Eventually, when we manage to sign up enough drivers and capture a good amount of the market, we might approach Karwa for a tie-up that will introduce Q-Cab to 100% of their taxis,” Awadallah says.

Right now their focus is on connecting customers and drivers in a simple and user-friendly manner. “People wouldn’t have to wait forever for taxis outside on the streets or be forced to use illegal taxis” [incidentally, when caught both the driver and passenger are penalised] “and the taxi drivers can also maximise their revenue.”

In the survey they conducted during their customer validation phase, 17 out of 20 taxi drivers said they would use such an application if available.

Even within the GCC, each city is unique in terms of what public transport infrastructure is available to its residents, the quality of such facilities and how TNCs fit into the larger scope of things (a case in point is how the use of New York’s Taxi Medallions as an investment asset is being threatened by TNCs). “Just because these strikes happened in one place, doesn’t mean they’ll happen in another,” Abukhater says while pointing this out. Furthermore, unlikely as it may be for taxi drivers in Doha to come together to protest anything (keeping in mind that trade unions are illegal in the country), many of them are still oblivious to the existence of services such as these that are drawing away customers that they never had in the first place.

"Our plan is to directly sign on Karwa drivers (including those working for the franchisee companies) and select those who already have a smartphone so that they can start using the app to find customers."

TARIQ AWADALLAH Co-founder Q-Cab

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