Regulatory constraints have prevented industry operators from reducing prices in response to weak demand over the past five years
Melbourne, Australia (PRWEB) January 17, 2015
Stagnant revenue growth and heavy regulation have characterised the Taxi and Limousine Transport industry over the past five years. While industry services are well accepted across most demographics, they are discretionary and easily substituted. According to IBISWorld industry analyst Stephen Gargano, “weak discretionary income growth, fluctuating consumer sentiment and high household savings rates over the past five years have suppressed demand for taxi services, with consumers flocking to cheaper public transport providers.” Industry revenue is forecast to rise modestly, by an annualised 0.4% over the five years through 2014-15. Over the current year, revenue is forecast to improve by 1.6%, to $5.5 billion.
The industry complements public transport and private vehicle transport by providing flexible door-to-door transport for consumers. Taxi services dominate the industry and are heavily regulated. State governments determine the number of taxis on the road, the fares they can charge and the structure of the industry. “Regulatory constraints have prevented industry operators from reducing prices in response to weak demand over the past five years,” says Gargano. As a result, revenue suffered while profit margins remained steady. Other segments such as wedding cars and luxury cars fared better in terms of revenue, as they were able to lower prices to boost demand. The structure of the industry is poised to change over the next five years, assisted by shifts in regulation and the adoption of new technology. The overhaul of licensing arrangements in Victoria, introduced between 2012-13 and 2013-14, will significantly affect the industry in that region, which is an important source of revenue. In addition, regulators in other states oversee similar markets and so the Victorian reforms may constitute a precedent for regulation change in other states. Technology shifts and regulatory changes are expected to support industry revenue growth in the next five years.
Market share concentration in the Taxi and Limousine Transport industry industry is low. The vast majority of the industry is comprised of individual licence holders, and small operators, who own a small number of licences. Substantial regulation and the homogenous nature of industry products are barriers to high concentration. In addition, as economies of scale are hard to achieve once cabs are running frequently, the profit incentive for consolidation is weak.
For more information, visit IBISWorld’s Taxi and Limousine Transport industry in Australia report page.
Participants in this industry are primarily involved in operating taxicabs or private hire cars, or providing specialty road transport services such as wedding cars.
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IBISWorld industry Report Key Topics
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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