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How Would The Taxi Business Of ComfortDelgro Corporation Ltd Be Affected By Driverless Cars?

Singapore made history this week by being the first country to launch a driverless taxi service.

The service, currently on a free trial basis, belongs to nuTonomy, a technology startup based in Singapore and the US . Right now, the service only has a fleet of six cars and operates in only one district (the One-North district). But, the company hopes to have a complete self-driving taxi fleet by 2018.

So, is the future of driverless cars getting closer in Singapore? And what does it mean for the traditional taxi services provided by companies such as ComfortDelgro Corporation Ltd (SGX: C52) and SMRT Corporation Ltd  (SGX: S53)? Thing is, the impacts might not be huge.

For one, new technologies are often associated with high costs. Even though companies such as nuTonomy can launch a driverless taxi service, it might take many years before such services can be economically competitive with incumbents’ offerings.

Moreover, existing taxi companies would likely not sit idly by and wait for new technologies to replace their business models. They too can innovate and create their own fleet of driverless cars. Or, they could even invest in or licence the relevant technologies from companies such as nuTonomy and import it into their own fleet of taxis.

The real groups that suffer

The most obvious group that would be affected are the current taxi drivers. If or when driverless vehicles can provide taxi services in a cheaper and safer manner compared to the current situation, taxi drivers might need to think hard about their future careers.

During his recent National Day Rally speech, Prime Minister Lee Hsien Loong mentioned that the government would not stop and prevent new technologies from disrupting current industries. The government’s preferred action would be to help those who are affected to upgrade their skills for career changes.

The second group that might be affected are car manufacturers and dealers. In the latter category is a company such as Jardine Cycle & Carriage Limited (SGX: C07), which distributes popular car brands such as Mercedes-Benz, Mitsubishi, Kia, and Citroen in Singapore.

As driverless taxi services and other ride-hailing technologies become more accessible and cheaper, the need for individuals to own a car could decrease. Combining this with the Singapore government’s push for a “car-lite” Singapore, the long-term prospects for car manufacturers and dealerships here may be dim.

Foolish Summary

But, all the above are just speculations on my part. How exactly driverless taxi services will affect the taxi and car industries is an unknown. One thing is for sure though – change is coming.

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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 owns shares in Jardine Cycle & Carriage.