The Taxi Industry — Have We Come Full Circle?

Sima Megrel

Taxi companies have seen drastic changes over the past decade. Not only have ride-hailing services proven big competition, but consumer behavior has changed, too. In fact, a study by Statista shows that by 2026, 53% of total revenue across the taxi and ride-hailing industry will come from online sales — a big shift for a once-offline industry.

While there might be challenges ahead for taxi firms, the way the industry has evolved presents several opportunities. Statista expects the taxi and ride-hailing industry to show an annual growth rate of 7.51% — this would result in a projected market volume of $369.30bn by 2026.

To capitalize on this, taxi companies should look for ways to increase utilization and make the most of their existing assets. In fact, this is one of the biggest advantages a traditional taxi company has over a ride-hailing app; being asset-heavy means they can leverage economies of scale.

a women street hailing with mobile

Here are 3 major opportunities that taxi operators should take advantage of in order to position themselves as a strategic player in the evolving mobility landscape:

Ride-hailing apps can function as another source of demand

Many taxi firms might see ride-hailing companies as the competition to beat, but there’s an incredible opportunity to form mutually beneficial partnerships. While ride-hailing companies have seen significant growth in the past decade, they don’t have the same economies of scale as taxi firms, as they don’t own the vehicles and find it challenging to increase profit margins despite their growth in the number of rides.
Essentially, every driver is an independent entity paying the same amount for the vehicle costs including maintenance, depreciation, insurance and gas.

Ride-hailing companies are also facing wider driver shortages, especially in areas where there is increased driver regulation, this means they’re keen to partner with local taxi firms to hold onto key markets.

With ride-hailing companies putting their own money into the promotion of their apps, taxi companies benefit from increased demand without the need to increase marketing dollars. In other words, taxi companies can begin to bring in customers from different sources, adding rides from popular apps on top of those that come through existing methods.

But taxi companies must maintain ownership

While there is a considerable incentive for taxi companies to increase demand with this kind of partnership, there are some critical factors they need to be aware of.

How to partner right
  • Centralized dispatching: It’s important for the taxi company to control their own dispatching rather than allowing the ride-hailing companies to dispatch on their side, essentially selling a ride rather than renting out the drivers. This allows the taxi operator to enforce dispatching policies and manage the operation centrally. With multiple sources of demand, the taxi operator can optimize the fleet and maintain a high level of efficiency and customer experience.
  • Use a single driver app: A single taxi company branded driver app that aggregates all sources of demand, creates a significantly better driver experience, increasing driver loyalty and retention.
  • Don’t agree to exclusivity: While ride-hailing companies might insist on exclusivity, taxi firms should avoid this to ensure they can maximize demand from multiple sources that are complementary and allows them to utilize their fleet as much as possible and complete more rides.

Optimization — Same fleet, more business

While taxi firms could add more drivers and vehicles to potentially increase revenues, fleet optimization is often a better solution as it improves results by getting more from existing assets. This can be achieved by using the right technology to improve your fleet’s performance.

Here are just 2 examples of optimization opportunities that have a significant impact on the fleet:

Optimized Ride Dispatching

Most off-the-shelf taxi dispatch software are based on straight-line distance — as the crow flies. This method doesn’t take into account road layout, traffic conditions, special events or other elements (such as one-way streets) that could affect the ETA. With optimized dispatching, the technology looks at all the variables that could affect pickup times and understands that the closest driver by air distance isn’t necessarily the one best placed to take on the ride.

To demonstrate this, let’s take the following scenario:

James has just finished a long day at the office and is eager to get home in time to watch the latest episode of House Of The Dragon.

There are 3 available vehicles in his vicinity, marked by 3 colors — red, blue and green.

Which vehicle should we dispatch James’s ride to? Seems obvious that the red vehicle is the one that’s going to get James home in time to watch the show.

Automation vs. Optimization: Which car would you dispatch/match?

Take another look, if we consider the actual available routes (vs air distance) and that the red vehicle is headed in the opposite direction, it seems that now the blue vehicle is the one that will be the fastest.

Let’s try that one more time, but this time let’s also consider the traffic conditions. The blue vehicle is in standstill traffic and would take 20 minutes to pick up James, and actually, the green vehicle will be able to allow James enough time to get home and make some popcorn.

Reducing ETAs, accounting for real-time conditions

Accounting for all these factors in real time makes a big difference to reduce ETAs, improve cancellation rates, increase the efficiency of the fleet and maximize customer satisfaction.

AI-powered Demand Prediction & Rebalancing recommendations

Another way to optimize your fleet using technology is by predicting future demand.

By leveraging advanced machine learning models, demand can be predicted across different sources such as a mobile app, street hail, call center and partner channels. Furthermore, the demand is predicted at varying levels of time and geographic granularity, depending on the specific operations.

Using the predicted demand, as well as the availability and location of drivers, personalized route recommendations could be generated and sent to drivers in order to increase the chances of receiving a ride, maximizing driver earnings and reducing customer waiting time.

At Autofleet, we have seen over 35% increase in completed rides through rebalancing recommendations and demand prediction.

AI-Powered Demand Prediction & Rebalancing Recommendations
Predicting future demand

Technology empowers taxi companies by enabling them to maximize fleet performance. Embracing advanced capabilities such as Optimized Dispatching and Demand Prediction means fleet operators can do more business with the same resources. With cars in the right place at the right time, and being dispatched in the most efficient way, companies are able to increase income without drastically increasing costs. This leads to more profit but also enables better driver and customer experiences.

Take charge of the future with the ideal EV plan

There’s a big push for fleets to switch to electric, and for taxi firms, this makes a lot of sense. The total cost of ownership (TCO) of an electric vehicle (EV), compared to an internal combustion engine (ICE) vehicle, becomes more favorable the more it’s used — this is because the higher initial investment of an electric vehicle is offset by fuel and maintenance savings.

However, transitioning to EVs presents some operational challenges that need to be addressed. It’s important you have the right planning tools and technology in place to help predict how the switch might affect your operation, as well as to de-risk what currently works and smooth out future operational issues.

To see the benefits of an electric fleet, taxi firms must ensure they can maintain their completed rides per day without letting the customer and driver experience slip. One way to do this is through the use of technology. Simulations in particular can help you better understand the needs of your fleet while taking into account both range and charging strategy.

Running predictive simulations before you make the switch can help empower decision-making.

Some of the insights include:

  • The daily range needed and, therefore, which EVs would be most suitable
  • Optimal charging locations
  • Impact of charging time on the driver experience (i.e. how much time will be spent waiting for a car to charge)
  • How charging and range will affect ETAs

With a simulation, you can understand how things might change and put plans in place to minimize disruption as much as possible. This helps to ensure a smooth transition with positive effects on the business.

future electric taxi car charging.jpg
Transitioning holds operational challenges that need to be addressed


Taxi companies have a considerable role to play in the future of mobility. Ride-hailing partnerships, electrification, and fleet optimization all present major opportunities as the industry continues to evolve. To maximize operations in the future, the use of advanced technology is key.

Here is a short cheat sheet for future use:

Steps for Effective Taxi Operation- What to do to grow your business — cheat sheet
Steps for Effective Taxi Operation- What To Do to Grow your Business

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