Vocational licence imposition on chauffeured drivers could dampen its growth
The Land Transport Authority has indicated that it could impose stricter
penalties as well as vocational licences on the chauffeured vehicle industry in
light of its recent growth and development. That could impact all non-taxi
services, which includes app chauffeuring such Uber and GrabCar (by
GrabTaxi). Some Uber drivers indicated that “time and money required to take
a vocational course will be an extra burden” (Non-cabbies offering paid riders
may need to be licensed to safeguard commuter interest: LTA, The Straits
Times, 10 of June). In the same report, the National Taxi Association indicated
that it chauffeured fleets should be regularly maintained and serviced.
Supply of app chauffeurs could be impacted : casual, young and foreign drivers
Our channel checks have indicated that convenience is the key reason for app
chauffeuring over driving taxis. This is so as they have the flexibility of driving
without shift work and the exclusion of the minimum daily mileage of 250km.
Naturally monetary benefits are lesser as app chauffeurs drive lesser distances,
subject generally to a lower fare and pay higher booking commission (c.20% of
fare per trip compared to c.30-40cents/trip for taxi booking) as compared to
taxi drivers. A potential 3 year vocational licence (assuming similar to taxi)
would require the application to take a 95 hour course on 5 modules (reduction
in convenience), must be Singaporean (we note several foreign drivers on Uber
website) and above 30 years old (Uber require drivers above 25 years old).
Building market share is essential in penetrating the app chauffeuring business
given that app bookings are islandwide. A smaller pool of chauffeurs would
High taxi lease rates should maintain; leases make up >99% of taxi revenues
We maintain our view, from our 6 of March report, that chauffeured apps are
not a significant threat yet.
(1) Their critical mass is still small and it would be
hard to service the wider population. Uber started in 2013 in Singapore and we
believe its numbers are much smaller than CD’s c.17,000 and SMRT’s c.3,500
(2) Vehicle growth rate is stagnant at 0.25% (972k vehicles of which
commercial and rental cars make up 4%). Hence we think that there is limited
growth in the number of vehicles available for private hire service.
(3) Uber is
prohibited from street hails, which makes up c. 80% of taxi ridership.
fares are deregulated and can be raised to maintain a high taxi lease rate.
Lease rates has been consistently close to a 100% and CD/SMRT has been
generating c.10% EBIT taxi margins historically.
Maintain Buy on CD / SMRT; Bus reforms should remain the focus for investors
Taxi contributes to 32%/12% of revenues and 22%/11% of EBIT for CD/SMRT
respectively in the last FY
. We maintain Buy on CD with a TP of S$3.48 and
SMRT with a TP of S$2.43
. (Read Report)
Source : Deutsche Bank Markets Research
Labels: ComfortDelgro, SMRT, Transportation Sector