How Might The New Taxi Fare Structure Affects ComfortDelGro Corporation Limited and SMRT Corporation Ltd?

The Land Transport Authority (LTA) and Public Transport Council (PTC) have made a proposal to standardize the taxi fare structure. According to local newswires, the proposed changes are expected to be implemented in the second half of this year.

There are currently four types of fees that come with a taxi ride: the flag-down fare; unit fares; surcharges; and booking fees. The proposed standardisation plan will affect all the different types of fees except for the flag-down fare.

According to the LTA, the proposed plan will allow taxi companies to charge their own unit fares, but they must be based on the following: every 400 metres travelled after the first kilometer and up to the tenth kilometer; every 350 metres travelled after the tenth kilometer; and every 45 seconds of waiting time.

As for the surcharges and booking fees, every taxi company will have to follow the fee structure specified by the authorities.

What would all these changes mean for the larger taxi operators like ComfortDelGro Corporation Limited (SGX: C52) and SMRT Corporation Ltd (SGX: S53)?

Although it might seem like the new rules can benefit smaller operators, the proposed changes would still allow taxi companies to set certain aspects of their own fares (like the unit fare for instance).

So, taxi companies would still be able to compete with one another on price. In such an instance, commuters might be the main beneficiary group as they can now easily see which taxi company has the lowest overall fares.

In the long run, the taxi company that can provide its services at the lowest cost might also win big as commuters would love the lower prices while competitors can’t match those fees. If that’s really the case, the current operator with the largest scale, in this case ComfortDelGro, might just see its competitive position strengthen with the new fare changes.

Foolish Summary

Of course, these are all just my personal assumptions, which might turn out to be very wrong. With the upcoming changes to the taxi fare structure in Singapore, it’d be interesting for investors to observe the eventual impacts to SMRT and ComfortDelGro.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.