Is Comfortdelgro Corporation Ltd Going In The Wrong Direction With A Recent Price Hike?

I wrote an article in late April about SMRT Corporation Ltd’s (SGX: S53) launch of its private hire car business.

Back then, I was wondering how would Comfortdelgro Corporation Ltd (SGX: C52) respond to the changing landscape of its taxi business.

It’s likely that usage of private hire cars by consumers will increase given the government’s moves in April this year to regulate the private hire car industry (and also in effect, allowing private hire car service providers to operate in Singapore).

Turns out, one of the recent changes that Comfortdelgro made to its taxi business was to increase the surcharge for its limousine taxi service (Maxicabs) by S$3 per person for the fourth person onward; the increase came into effect on 9 May 2016. This was in response to Comfortdelgro drivers’ recent complaints that the company’s daily rental rate of over S$160 is too high.

The practice of having a surcharge for additional passengers is also seen at other taxi companies. But, the surcharges for some of them are lower than Comfortdelgro.

Given the generally higher surcharges for Comfortdelgro’s Maxicabs, it’s possible that travellers may shun the firm’s taxis. That’s a fear that some Maxicab drivers had expressed when news of the S$3 surcharge by Comfortdelgro first appeared.

Raising the prices of its services does not seem like a smart move for Comfortdelgro to make given the competitive forces at work in the taxi industry.

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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 contributor Ong Kai Kiat does not own shares in any companies mentioned.