Will surge pricing turn into a scourge?

Will surge pricing turn into a scourge?
JustGrab launched to little fanfare yesterday
PHOTO: The Straits Times

So it looks like nothing is standing in the way of taxi companies imposing their version of "surge pricing" on customers.

Last Friday, the Public Transport Council (PTC) and the Land Transport Authority (LTA) issued a statement saying they had "no objections" to the proposals by taxi companies to impose what they termed "dynamic pricing".

Surge pricing, a system used by private car-sharing apps such as Uber and Grab, adjusts fares according to passenger demand in a particular area at a particular time.

Taxi companies had applied to the PTC to be allowed to introduce such fare pricing on bookings made on mobile apps.

Uber and GrabCar have, in recent years, provided real competition to cab companies, with media reports of many un-rented cabs sitting around.

There was hope that, if nothing else, this competition will finally drive cab companies to provide better service to customers and better welfare for their drivers too.

I find it rather ironic that of all the things to learn from the likes of Uber and Grab, the cab companies have chosen to copy their surge pricing.

After all, surge pricing is probably the one thing that commuters hate most about these apps.

Just think back to July 2015, when two of the main MRT lines - the North-South and East-West lines - had a major breakdown that lasted for 3½ hours.

Read also: Taxi operators get green light to implement surge pricing

Uber implemented surge pricing of up to five times the usual fare, prompting a huge outcry online among frustrated commuters.

Within an hour of the surge, Uber readjusted fares to remove the surge mechanism.

Strangely enough, the largest cab company here, ComfortDelgro, said after the PTC's and LTA's okay that it will not be introducing surge pricing.

Instead, it will introduce a flat fare based on a metered-fare structure.

Uber and Grab say they use surge pricing to encourage more drivers to get out on the road when demand is high.

DOUBLE-EDGED SWORD

The reverse will also then be applicable - that when there is no surge pricing, fewer drivers are out picking up rides.

Uber and Grab can get away with this, fairly or unfairly, because they are not seen as the mainstays in the business like how cabs are viewed.

But if cab companies introduce surge pricing too, would taxis still ply the roads for a flag-down customer who will probably be paying a lower fare?

Read also: 'Dynamic fares' in the works at 4 taxi companies: What you need to know

Would people in Orchard Road on a Friday night be able to get a ride back home without paying ridiculously high prices?

And would taxi companies be losing the very edge they currently hold over Uber and Grab by introducing dynamic pricing?

When I need a ride, what I usually do is check Uber and Grab to see how high their surge is.

If I feel the fare is unreasonable, I will either wait for it to go down or take a GrabTaxi instead.

But if all parties - Uber, Grab and taxis - are charging surged fares, which will I go for?

I'm pretty sure it's not the ones with the grumpy uncle behind the wheel.

benjamin@sph.com.sg


This article was first published on Mar 20, 2017.
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