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The Future Impact of Driverless Cars on Taxi Operators

Go back say, 20 or even 10 years ago, and driverless cars would be a science fantasy. But today, driverless cars have arrived on our sunny island of Singapore.

In late August, nuTonomy had launched a driverless taxi trial in Singapore; it is the first such trial in the world. Then last week, nuTonomy and ride-hailing platform Grab announced that they will be collaborating on said driverless taxi trial. nuTonomy has an aim to introduce 100 commercial driverless taxis in Singapore by 2018.

Elsewhere around the world, there are other companies that want to introduce driverless cars to the world over the next few years.

Back in September 2015, Elon Musk, the founder and chief executive of US-based electric car manufacturer Tesla, said that the company can have full-autonomy technologies ready by 2018. Other companies such as US tech giant Alphabet and Japanese auto maker Toyota are also working on a 2020 deadline for their own driverless car projects.

In other words, major players are piling into the game of driverless vehicles and they could be commercially available on a major scale from 2020 onwards. What might this mean for Singapore’s economy and business landscape?

Solution for manpower crunch

Last October, the Straits Times reported that there were as many as 2,000 idle taxis simply because taxi operators couldn’t find sufficient drivers for their fleet. In the article, it was mentioned that Trans-Cab, the second-largest taxi company in Singapore, had around 800 idle taxis.

Idle taxis represent costs to taxi operators as they have to account for things such as the depreciation of the vehicles, the associated insurance fees and road taxes, and the opportunity cost of loss of rental income.

A professor from the National University of Singapore conducting research on transport issues had estimated that the idle Trans-Cab fleet of 800 or so taxis could cost the company nearly S$3 million per month. In Singapore’s stock market, competitors of Trans-Cab in the taxi market include ComfortDelGro Corporation Ltd (SGX: C52) and SMRT Corporation Ltd (SGX: S53).

If taxi companies in Singapore are able to get their hands on driverless vehicles, manpower constraints could be solved.

Adapting to a driverless car reality

The future is uncertain and there’s no guarantee that driverless cars can become a reality. But, given the amount of interest in the field from some of the biggest and smartest companies on the planet, there’s a chance that important breakthroughs can happen in the driverless car sphere over the next few years.

Companies that are related to transport in Singapore – such as Vicom Limited (SGX: V01) for instance, which does vehicle inspections – may have to adapt to new ways of conducting business. Regulatory bodies would also have work to do to make sure regulations allow driverless cars to ply the roads in a safe and efficient manner.

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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.