This is a post on Radio Taxi business in India. I am using Meru just as an example to understand the economics of business. There are simple back of an envelop calculations and hope someone gives me a better insight on this business. The numbers look too tempting to be real.
I was traveling with Meru yesterday (27th July 2008) and I happened to strike a conversation with the driver. During our conversation, he gave me following stats
- No of Meru taxis on Mumbai roads: 800
- No of taxis by EOY in Mumbai: 1300
- Average occupancy: 100% in peak-hours and 80%+ in non-peak hours
- Peak Hours: 7AM to 10AM and 6PM to 10PM. He said that its impossible to get a Meru Cab in peak hours. This vindicates the business model and demand in the market for these call cabs.
- Average Fare: Rs. 15 per KM. Compare this with regular taxis in Mumbai. A regular taxi is Rs. 13 per KM and a premium of Rs. 2 is not very steep considering the convenience and comfort of a call cab.
With these numbers the business sure makes a lot of sense. Only deterrents I can think of are:
- High fixed cost of acquiring taxis. Not a huge problem. They can take long term loans from banks or PE players. They can also acquire more cabs by using the part-ownership model (where each driver pools in some money to own the taxi and Meru is just a brand name).
- Setup of call center. Obviously each taxi needs to have a GPS device and a two-way radio. There has to be a way to connect the cab with the nearest available free taxi. And since this is a pure service offering, call center is very important.
- Capped Potential: The earnings is directly proportional to number of taxis on the road. The scope of innovating on income stream is really low. At max you can use your taxi as an advertising medium.
- Traffic rules and regulations: Registration with transport authorities in India is a very cumbersome and long process. Although this is a one-time stumbling block, companies would have to divert a lot of attention there initially.
- What else? Am I missing something here?
- I would want to what percentage of bookings is done for immediate travel and what percentage is booked at least 2 hours in advance. If the pre-planned travel is very high, then these companies can better utilize their capacities and go for some kind of planning.
- I would also want to know what percentage of bookings is for large corporates (say institutional). Because moment Meru gets institutional bookings, they can again manage the fleet better and can be assured of certain minimum number of bookings.
- Is their a merit in getting into contracts with airlines, hotels,
coporate parks etc to manage their taxi services? Again its of those
things where you convert huge one time capex for companies into on-demand opex.
- What innovations are possible so as to maximize the utilization of fleet and make more money from the same number of taxis? Would a thing like car-pooling work with radio taxis? Say junta going from Andheri to Town everyday can pool a Meru.
- What else? Please send in your suggestions.
From the Meru website, I could get following details
- After Mumbai, Meru is now available in Hyderabad, Bangalore and Delhi. As I said earlier also, the business potential is vindicated by simple calculations.
- India Value Fund has already invested in Meru. Although I am no fortune teller, but I can easily foresee a handsome return on the investment. And I can’t understand why the Penguin effect is absent in this industry. If I had money, I would have loved to get into this business. Obviously at the right time and right price.
Other Radio Taxi Players in India
If anyone can help me connect to someone with Meru or any other radio cab owners/managers, please drop a line. I will keep on updating this post on my wiki at s4ur4bh.pbwiki.com.
Image Credits: Andertho via Flickr
Disclaimer: I am assuming that the occupancy rates given by that driver are correct and the taxi service would have similar occupancy numbers in other cities.
Posted originally on my blog here.
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Well use megacabs if meru is not available.
In Delhi right now and saw a taxi zipping past me that had printed “R. 7.5 per KM only” in bold letters across it.
Wow. Competition on price is something I hadnt imagined.
Lets see what else is waiting to happen in this very nascent yet interesting play.
Parthban, I would say that if anyone went to such depths they would start the business themselves instead of telling you these details. Everything you’ve asked requires a few visits to a nearby RTO, or to speak with a CA. It seems to me like it’s far better you go do this research yourself, on the field, than ask on a forum like this one.
DARE did not give what I wanted. See, the main problem for people like me (non business people thinking of starting a business) is that we just do not know what are the building blocks needed to build a business except the concept and its technical part (well, atleast that!). Say, I want to start a call taxi service. What are the very first steps I need to do, to do a capital analysis? I need answers for questions like this:
1. What are the different licenses we need to operate radio cabs in India? (say in Tamil nadu if it is state specific)
2. Assuming there are two licences (correct me if more), one for driving and another for operating the call taxi business, the former (driving license) is obvious but the latter, is it just like you go and register your business in the city and get the license? If not, where should I apply for it?
3. How much cost involved in all these types of licences?
4. How much installing a base radio station and individual cab units would cost?
5. How much more it would cost if equipped with GPS?
6. What is the usual business model followed in India as far as radio cab are concerned?
There could be more as I dig more. But these are the questions for which I need answers very badly. Please help guys.
As far as I know the black and white taxi costs are abt Rs. 9 per km.
The Rs 13 they charge is for approximately 1.6 km.
So therefore Meru cabs work on a premium of about 67% which sounds very feasible.