[Regulatory Republic] Promised to Create More Tada Services... Reality Is a 'KakaoTaxi Kingdom'

'Tada Ban Law' Passed 1 Year 10 Months
Franchise Taxis Centered on Large Corporations Rapidly Grow
Contrary to Expectations, Reorganized Mainly Around Taxis
Structure Changes to Make Startup Entry Difficult

It has been 1 year and 10 months since the amendment to the Passenger Transport Service Act, known as the ‘Tada Ban Law,’ was passed. Contrary to the Ministry of Land, Infrastructure and Transport’s bold claim that “more Tada services” would emerge, the mobility market rapidly grew centered around franchise taxis operated by large corporations. As the market reorganized around taxis, it became an even tougher environment for startups to survive the competition. Industry insiders express a self-deprecating sentiment, saying, "South Korea has become a Kakao Taxi kingdom."

According to the current Passenger Transport Act amendment as of the 11th, platform operators are classified into three types: ▲Platform Transport Business (Type 1), such as ‘Tada Basic’ operated with white Carnival vehicles, ▲Platform Franchise Business (Type 2), like Kakao T Blue, and ▲Platform Brokerage Business (Type 3). To operate a platform transport business, operators must pay a contribution fee in the spirit of coexistence with existing taxis. Platform transport operators running a rental car call service in the existing Tada Basic style must choose one of the following to pay as a contribution fee: 5% of sales, 800 KRW per trip, or 400,000 KRW per vehicle per month. When the law was passed, the Ministry of Land, Infrastructure and Transport promoted it on their website header as “not the Tada Ban Law but the Mobility Innovation Law,” stating, “There will be more and more diverse ‘Tada’ services.”

However, the reality was quite different from expectations. According to the Korea Startup Forum, the operating cost per vehicle for platform transport businesses is 8,475,669 KRW per month, and the business profit per trip is about 475.51 KRW. Paying the 800 KRW contribution fee per trip results in a loss of approximately 324 KRW. ‘Tada,’ which judged that operation was impossible under the current contribution fee system, endured losses amounting to hundreds of billions of won before shutting down operations. Chacha, which operated in a similar manner to Tada, also closed its doors.

Meanwhile, the market reorganized around Kakao Mobility’s franchise taxi, ‘Kakao T Blue.’ As of July 2020, Kakao T Blue had fewer than 10,000 vehicles, but it has now grown to about 30,000 vehicles. ‘Woorti,’ a joint venture between SK Telecom and Uber, announced plans to expand its franchise taxis to 20,000 vehicles within the year, and Tada introduced a franchise taxi called ‘Tada Light.’ According to Mobile Index, Kakao Mobility’s taxi-hailing app ‘Kakao T’ holds a dominant first place with 11.36 million monthly active users (MAU). Woorti’s MAU is 516,109, and Tada’s is about 139,688.

Industry insiders agree that the mobility market has become structured in a way that makes it difficult for new services other than taxis to enter following the passage of the Passenger Transport Act amendment. On the 29th of last month, the Ministry of Land, Infrastructure and Transport approved platform transport business licenses for three operators: Coactors, RainforCompany, and Papa Mobility. However, even combined, these three companies have only 420 licensed vehicles. The industry believes that at least 1,000 vehicles per company are necessary to operate a business. A mobility industry insider said, “In a situation dominated by Kakao Taxi, it is nearly impossible for new entrants to break in,” adding, “Under the current structure, I can say with certainty that innovative services from new startups will not emerge.”

Experts emphasize that a proactive government stance is necessary to activate diverse mobility services. Professor Choi Kyung-jin of Gachon University’s Department of Law said, “Introducing regulations that block or halt innovation is undesirable. Although it was unavoidable at the time, there is regret that more persuasion of the taxi industry, raising their sense of crisis, and discussions on service diversification should have taken place,” adding, “Ultimately, the only solution is to change the law. Since the government continues to maintain or limit the total number of taxis, the same problems will arise again.”