Why the ride sharing transport industry has floundered

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UNLESS you live in a far-flung province and have never set foot in Metro Manila in the last few years, there’s a good chance you’ve already tried getting around using TNVS — or transport network vehicle service. It’s like riding a taxicab, but instead of hailing a public-utility car by the roadside, you do so from the air-conditioned comfort of your home or office, using an app installed on your smart phone. You probably know this service by the popular companies that provide it, like Grab (or Uber, before it sold its Southeast Asian business to Grab).

You may have also heard that this particular sector of our transport industry is struggling. It’s struggling with government regulations. It’s struggling with the existing fare structure. It’s struggling with the supposedly inadequate supply of available cars and drivers.

The last is particularly alarming. What used to be a total of 125,000 vehicles between Grab and Uber is now down to 35,000, according to Grab. This is the result of, first, the 65,000-car limit imposed by the Land Transportation Franchising and Regulatory Board (LTFRB) early this year, and, second, the refusal of former Uber drivers to cross over to Grab. But perhaps more tellingly, in an interview with the motoring website Visor, Grab Philippines public affairs head Leo Gonzales said that some 15% of drivers quit every quarter. The reason? These drivers no longer find the gig to be financially rewarding, and so they just move on to the next job.

Even TNVS drivers who own the cars themselves leave. A former Grab and Uber driver told me that he spent P4,165 a day just to operate one of his cars (a Mitsubishi Mirage G4 and a Toyota Wigo) for a transport network company (TNC). This amount included car amortization, fuel, meals, the TNC’s commission (25%), and other miscellaneous expenses. Which meant he had to earn more than P4,165 within a 24-hour period just to earn something. And so he stopped driving for Grab in March this year and now works for a life insurance firm.

What happened? Why are TNVS drivers suddenly scrapping for decent profit? There used to be a time when these drivers made so much money that many office employees simply gave up their salaried jobs, bought a car for TNVS use, and decided to drive for either Grab or Uber (or both).

I can think of three major reasons why the TNVS gig is now having a difficult time sustaining its workers.

First, the original business model was not preserved. There’s a reason this mode of transportation is referred to as “ride-sharing.” The idea is to share, not to rent or ply. The initial concept was for private car owners to make their vehicles available for other commuters who needed to travel on the same route. The proposition, I believe, was something along the lines of “make money while you drive to your office.” This wasn’t meant to be a full-time job for drivers. The app was simply a way to connect car owners who had empty passenger seats, with commuters who didn’t have a ride but were headed in the same direction. It was supposed to be a win-win situation: The car owner would make some extra dough, and the roads would see fewer vehicles as the setup essentially promoted carpooling.

What happened instead was that enterprising individuals made it a full-time, moneymaking venture. Some operators even purchased more than one car and hired drivers to run them. In this sense, it became just a glorified taxi service, minus the exterior liveries and the metered fares. Before we knew it, the number of TNVS vehicles had ballooned to 125,000 — significantly contributing to vehicle traffic and basically shrinking the income pie to be shared by the drivers.

Second, with Uber now gone and with Grab the only major TNC in our market, the incentives that were previously used to entice and motivate drivers have all but disappeared. Ask any TNVS driver and he’ll tell you that those incentives were the gravy that sweetened the pot and made the work (and all the time spent in traffic) worth it. Without these bonuses, some drivers are now having a hard time making ends meet.

Third, our slow-to-react LTFRB can’t seem to regulate TNVS players properly. In the eyes of government regulators, TNCs are just a smart phone-aided taxi service. Hence the strict rules on fare pricing. I say let the players determine their fares. TNVS shouldn’t be treated as a basic mode of public transportation. It’s a luxury for people who can afford it. If the TNCs price themselves out of the market, that’s on them. And if riders are willing to pay what the TNCs are charging them, why stop them? Just make sure these companies pay the proper taxes and put in place all the necessary safeguards to guarantee public safety.

I still maintain that TNCs need to be regulated, but they should be regulated using an entirely different set of rules. You can’t lump them together with taxi and bus operators. It’s in this area where the LTFRB has continued to disappoint.

Meanwhile, as you read this, Grab is preparing to roll out a service dubbed GrabHitch, which the TNC describes as “social carpooling.” This means private motorists can pick up riders who are traveling in the same direction, and ask these riders to share in the fuel expense. This isn’t for profit, Grab told Visor, just a way for private car owners to help with the current public transportation crisis. Come to think of it, this was the original concept of the so-called ride-sharing.