[News Inside Companies] 'Tada' Returns as the Savior of the Taxi Crisis, a Tumultuous Chronicle

The Tada service was launched in 2018.

[Asia Economy Reporter Lim Juhyung, Intern Reporter Song Hyundo] The Ministry of Land, Infrastructure and Transport is promoting the activation of mobility platforms such as 'Tada' to resolve the 'taxi crisis.' This comes about one and a half years after the so-called 'Tada Prohibition Act' was officially enforced. Tada entered the transportation business in 2018 with a vehicle call service using rental cars but faced various challenges including opposition from the taxi industry, conflicts with the government, and prosecution by the prosecution.

Tada is a vehicle call service created as a joint venture between the car-sharing company 'Socar' and the startup 'VCNC.' After acquiring VCNC in 2018, Socar combined VCNC's self-developed vehicle call application (app) with Socar's rental car business to launch the Tada service. While VCNC manages Tada itself, the vehicles used for calls are rented from Socar's fleet.

Launched in October 2018, 'Tada Basic' operated by having general 'drivers' who did not hold taxi driver licenses operate 11-passenger vans rented from Socar on a short-term basis. In other words, it was a model that entered the transportation business with fewer regulations than existing taxi business regulations such as taxi licenses. The use of 11-15 passenger large vans was based on Article 18, Paragraph 1 of the Enforcement Decree of the Passenger Transport Service Act, which exceptionally allows rental car operators to provide drivers.

The Growth Trend of Tada's First Service 'Tada Basic'

With the advantage of short-term rental cars and employing general drivers, Tada was able to expand its business faster than existing taxi corporations. In addition, Tada received great customer response due to its unique algorithm that reduces dispatch time, spacious and comfortable van interiors, and friendly service. According to Tada's data, the number of operating vehicles was about 200 and the number of users was only 330,000 in October 2018 when the business started, but by September 2019, about a year later, the number of operating vehicles had surged to 1,400 and the number of users approached over 1.25 million.

Taxi Industry Opposition, Government Conflicts, and Prosecution

As Tada rapidly increased its influence in Seoul and the metropolitan area, conflicts with the existing taxi industry intensified. The taxi industry viewed the 'Tada model,' which transports passengers without taxi licenses, as a threat to the livelihoods of existing taxi drivers. For example, individual taxi licenses are traded for about 100 million KRW and also have the nature of assets.

Especially as Tada attempted to expand its business with the premium taxi service 'Tada Premium,' opposition from taxi drivers grew sharply. In April 2019, the Seoul Private Taxi Transport Business Association requested Seoul City to deny the permit for Tada Premium, and in May, a taxi driver named Ahn died by self-immolation near Seoul Plaza.

At that time, the Ministry of Land, Infrastructure and Transport was promoting social grand compromise discussions between mobility platforms and the taxi industry. In July of the same year, the ministry announced the 'Taxi System Reform Plan for Innovative Growth and Win-Win Development,' which was the result of the grand compromise discussions. The reform plan focused on ▲ strengthening the competitiveness of the existing taxi industry such as establishing a monthly salary system for corporate taxis ▲ institutionalizing mobility platform operators.

Tada Incident Timeline

In particular, the ministry proposed that instead of formally licensing transportation businesses like Tada, an alternative to driver qualifications would be to pay a 'monthly contribution fee per operating vehicle' to the government. It also planned to specifically determine the total number of platform-operated vehicles to promote coexistence between platforms and the taxi industry.

Tada also opposed this reform plan. On October 7 of that year, Park Jaewook, CEO of VCNC, announced a new investment roadmap at a press conference marking the first anniversary of Tada's service launch, aiming to secure 10,000 operating vehicles and 50,000 drivers. Regarding the ministry's plan to institutionalize platforms, he expressed skepticism, saying "there has not been sufficient discussion," "the per-vehicle contribution fee method has limitations in user satisfaction," and "we will continue to voice our opinions." The ministry immediately criticized this as an "inappropriate measure."

The rally to ban Tada held at Gwanghwamun Square in Seoul in May 2019 / Photo by Yonhap News

Moves to regulate Tada also emerged in the political sphere. On the 24th of the same month, Park Honggeun, a member of the National Assembly's Transportation Committee from the Democratic Party of Korea, introduced the so-called 'Tada Prohibition Act.' This amendment effectively restricted the business by revising the enforcement decree clause that formed the basis of the Tada Basic business model.

To make matters worse, on the 28th of the same month, the prosecution indicted Socar CEO Lee Jae-woong and CEO Park Jaewook without detention on charges of violating the Passenger Transport Service Act. Earlier, in February 2019, former chairpersons and executives of the Seoul Private Taxi Association had filed a complaint with the prosecution alleging that Tada was providing illegal paid passenger services, and the prosecution sided with the private taxi association.

On February 10, 2020, the prosecution requested a one-year prison sentence each for CEOs Lee and Park. However, on February 29, the first trial court acquitted Tada, resulting in a dramatic revival for the company.

Crisis Due to Enforcement of the 'Tada Prohibition Act'

Tada's hardships did not end there. About a month later, the Tada Prohibition Act was passed in the plenary session of the National Assembly. Immediately after the bill's passage, CEO Lee expressed his intention to resign on Facebook, lamenting that "now mobility innovation can only be achieved based on taxis as the government envisions. It is regrettable that the government only sees mobility as taxi innovation." Additionally, Tada's managing company VCNC and its parent company Socar had to tighten their belts by accepting voluntary retirement applications from all employees.

The Tada Prohibition Act was officially enforced in April 2021, and the Tada Basic service was terminated. Meanwhile, Tada attempted business diversification by launching the franchise taxi service 'Tada Light' and entering the designated driver taxi service market, but these could not replace the flagship service 'Tada Basic,' which had attracted over 1.2 million customers.

Can It Become the Savior to Solve the Taxi Crisis?

After the end of COVID-19, taxi demand surged sharply while the number of taxi drivers decreased, leading to a 'taxi crisis.' According to taxi association data, as of February this year, the number of individual and corporate taxi drivers nationwide was only 239,434, an 8.4% decrease compared to the same period two years ago. On the other hand, taxi demand increased significantly. According to the taxi call app 'KakaoT,' the number of calls surged by 312% over two years.

To alleviate the shortage of taxi drivers, the Seoul Metropolitan Council passed an adjustment plan on the 28th of last month to increase the basic taxi fare from 3,800 KRW to 4,800 KRW, a 1,000 KRW increase. The government and ruling party also held an emergency meeting that day to discuss raising the flexible taxi call fee during late-night hours.

As existing taxis alone can no longer meet demand, voices calling for the reauthorization of the previously banned Tada service to resolve the taxi crisis are gradually increasing.

Amid this situation, on the 4th, the Ministry of Land, Infrastructure and Transport announced the 'Late-Night Taxi Shortage Alleviation Measures.' This plan includes activating the 'Type 1 Platform Transportation Business,' which is Tada's business model. It also seeks to reduce the 'monthly vehicle contribution fee,' which had been a significant burden for mobility platform operations, to an appropriate level. Since regulation and cost issues were the biggest obstacles to the Tada business model, this measure is expected to be a turning point that will determine the direction of domestic platform businesses.