[Opinion] Corporate Taxis Driven to the Brink Due to COVID-19

[Asia Economy Reporter Jongil Park] Corporate taxis pushed to the brink due to COVID-19

Chungseok Moon, Chairman of the Seoul Taxi Transport Business Association

COVID-19 is pushing corporate taxis to the edge. Due to the fear of COVID-19 and the government's social distancing measures, people's movement has drastically decreased, causing taxi transportation revenue to plummet. As a result, transportation workers are taking leaves or leaving, causing the operating rate of corporate taxi companies to fall to an all-time low.

In fact, at the beginning of this year, there were about 30,000 corporate taxi drivers in the Seoul area, but with the outbreak of COVID-19 and its recent resurgence, the number of transportation workers has dropped by 5,000 to 25,000, and even in the past month, about 600 more have left.

If this continuous departure of transportation workers persists, the number of corporate taxi drivers per vehicle, which should be 2.3, will fall to as low as one per vehicle. This is the worst situation in 60 years since corporate taxis began operating.

Accordingly, many vehicles are idle in corporate taxi company garages, causing each company to suffer financial difficulties. In addition, frequent resignations and leaves among transportation workers due to decreased transportation revenue are undermining employment stability and causing significant disruptions in fulfilling their role as public transportation for citizens.

Although passenger numbers for other transportation modes such as city buses and subways have also sharply declined due to COVID-19, in Seoul, city buses receive cost compensation from the city government for operating deficits under the semi-public bus system, and the subway is supported by Seoul for transportation deficits. However, financial support for taxis remains extremely minimal.

Corporate taxi companies that employ transportation workers are in a policy blind spot. Seoul's small and medium enterprise policy funds mainly support small business owners or micro-businesses, and government SME policy support excludes taxi companies due to collateral or credit issues.

Fortunately, Seoul City has considered this situation and is providing direct and indirect policy support to alleviate corporate taxi management difficulties through emergency management improvement funds and some regulatory relaxations.

However, to overcome COVID-19 and restore the competitiveness of corporate taxis, substantial government-level support is necessary, and above all, it is crucial to guarantee autonomy in management and labor relations so that the taxi industry can make self-help efforts.

Nevertheless, the government is producing policies that worsen the difficulties of corporate taxis rather than supporting or deregulating them.

Starting next year, the government will allow the transfer of individual taxi licenses without driving experience in business-use vehicles such as corporate taxis. Originally, the condition for granting individual taxi licenses was a reward for transportation workers who contributed to safe citizen mobility by driving accident-free in corporate taxis or similar vehicles.

As a result, many high-quality corporate taxi drivers are expected to leave, worsening management difficulties due to decreased corporate taxi operating rates and causing significant disruptions in fulfilling transportation roles. This destroys the balanced roles between corporate and individual taxis.

Now, there is even talk of lifting the alternating-day operation system introduced for individual taxi safety. If realized, this would threaten passenger safety, reduce corporate taxi drivers' income, and cause individual taxi license prices to skyrocket, creating a high entry barrier and resulting in policy side effects.

Another emerging issue is unfairness related to platform companies. Corporate taxis, under the Passenger Transport Service Act, maintain expensive garages and other transportation facilities, hire and manage qualified transportation workers, and comply with various business operator obligations under relevant laws, but

with the amendment of related laws, platform transportation services will begin in April next year. Platform taxis, which can operate taxi services by paying a certain contribution fee (exempt for fewer than 100 vehicles), will be introduced, raising concerns about unfair competition with existing licensed taxis.

Moreover, corporate taxis will implement a monthly salary system starting next year. While the introduction of a monthly salary system to taxis would be ideal, additional factors such as the impact of COVID-19, eased conditions for individual taxi license transfers, and excessive competition due to platform taxis will further reduce transportation revenue. How can corporate taxi companies afford to pay fixed salaries like office workers? Therefore, the monthly salary system should be postponed until the COVID-19 emergency ends, and instead, fare increases necessary for implementing the monthly salary system should be introduced.

Due to the sharp decline in taxi passengers caused by COVID-19, governments in countries like the United States and Japan have eased regulations to allow taxi delivery services, helping taxi companies survive and providing convenience to citizens.

Corporate taxis, already struggling due to the development of alternative transportation and rising transportation costs, are being pushed to the brink by the decisive blow of COVID-19 damage.

The government urgently needs to implement strong regulatory relaxations and substantial financial support so that corporate taxis can mitigate the shock of COVID-19, maintain employment through alleviating management difficulties, and properly fulfill their role as public transportation for citizens before it is too late.