Operators are investing in fuel-efficient vehicles to offset rising fuel costs and shrinking profit
Los Angeles, CA (PRWEB) March 25, 2012
The Taxi and Limousine Services industry suffered from a dip in consumer spending in 2008 and 2009. This fall was provoked by low disposable incomes, high unemployment and stricter corporate spending practices. In response to these changes, consumers switched to other types of transportation, such as public transit or carpooling. Alternatively, consumers downgraded from higher-cost services, like limousine services or luxury sedans, to taxis. According to IBISWorld industry analyst Lauren Setar, “one of the industry's largest markets is corporate travelers and business commuters.” The recession caused corporate profit to contract, which led many businesses to slash spending and corporate travel. This resulted in a substantial decline in demand for industry services. The luxury segment has been most adversely affected, with demand for limousines, town cars and luxury sedans falling sharply in 2008 and 2009. The recession's effects have been so severe that consumers resorted to cutting back on hiring limousines for weddings.
The Taxi and Limousine Services industry is expected to earn just $9.7 billion in 2012, recording an average annual decline of 4.4% since 2007. Revenue is expected to increase just 1.6% in 2012 as a result of increased consumer spending. Historically high corporate profit has led to growth in corporate spending; as a result, companies are spending more money on domestic travel. Rising fuel prices and changes in regulation have taken their toll on the industry, especially on profit margins. The world price of crude oil increased at an average annual rate of 7.7% in five years to 2012. This price is highly correlated with gas prices, which, combined with more fuel-efficient auto fleets, has led to increasing profit since its peak in 2008. Although some operators will implement fuel surcharges based on varying gasoline prices, industry firms are fighting this rising cost by investing in fuel-efficient vehicles or those powered by alternative fuels. Fuel-cost savings and some federal and state government incentive programs are making investments in hybrid-electric cars like the Toyota Prius.
The largest four companies in this industry are expected to generate less than 3.0% of revenue in 2012. The industry is highly fragmented and achieving economies of scale is difficult for many small operators. “Large entities do not generate a significant amount of revenue across regions because they still must maintain an office, a center for repairs and a lot in each operating region, in addition to complying with various regulations across regions,” says Setar. Although Yellow Cab Company did historically maintain a sizeable fleet of vehicles across the nation in the 1960s while under the Checker Motors Corporation, the company faced financial difficulties which led the company to split into regional entities. The largest entity from that split is Yellow Cab Chicago, which generates less than 1.0% of industry revenue with its fleet of 2,600 vehicles. For more information, visit IBISWorld’s Taxi & Limousine Services in the US report in the US industry page.
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IBISWorld industry Report Key Topics
Companies in this industry provide car or van-based passenger transportation. Establishments of taxi owner and operators, taxi fleet operators, and taxi organizations are included in this industry. This does not include transportation operated on regular routes or schedules.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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