If you’re anything like me (which you probably are since you got here), you’re constantly interested in how stuff works and why it works the way it does.
Taxi systems interest me, they work very differently in different countries (everyone drives their own car, 100% on provision, big firms with drivers on commission, government run etc) and I think you can tell based on the kind of service you get.
I’m also interested in the general supply and demand problem of planning taxis.
Therefore, the other day, going home from Arlanda airport, I took the chance to get the skinny on how Taxi Stockholm really works, who takes the financial risk, how much they make, how they match supply with demand etc. Pretty intesting I think.
There are three basic parts to Taxi Stockholm:
Unlike what most people think, the drivers usually do not own the cars they drive, more often, 2-3 drivers, are scheduled on a car that is owned by what in Swedish is called an “åkare”, loosely translated as a “garage owner” or “car owner”
- Car/garage owners:
These guys usually own several cars, they take a fairly small amount of the money that their drivers charge the customer, so this is really a scale business, where the money is in having many cars making money simultaneously (almost no drivers actually own their own cars since the revenue from owning a single car is not worth the hassle according to the drivers I asked). The car/garage owner makes sure his cars are scheduled and rolling 24/7. There is a central digital board system hosted by Taxi Stockholm that handles supply and demand between drivers and car owners, where drivers can click the hours that they want to drive a car. Usually a driver always drives the same car. But the car/garage owner doesn’t have anything to do with supplying actual customers to his drivers, this is the job of the dispatch.
- The dispatch:
Taxi Stockholm dispatch is obviously what supplies the actual customers to the drivers. Interestingly, Taxi Stockholm is not a share holder’s company (an AB in Swedish) but what is called an “ekonomisk förening” losely (and lossy) translated to a financial partnership, a cooperative owned jointly by all car/garage owners (about 950 across about 1600 cars).
The dispatch is obviously the whole value of being a part of Taxi Stockholm vs driving on your own since they connect demand for taxis with supply of taxis and apart from waiting outside night clubs at closing hour or Arlanda airport (more on that below), it is very hard to predict where this demand will be.
However, while many people think that the taxis are centrally controlled by the dispatch and told where to go in order to spread out and follow demand, it is actually much more bottom up and controlled by the drivers. All cars have a computer that shows three columns and a bunch of rows. Each row is a zone (e.g. Östermalm, Södermalm or Kungsholmen) and the three columns shows:
1. The taxis in this zone right now.
2. How many outstanding reservations this zone has right now.
3. How many pre-orders this zone has coming up.
Based on this demand info, drivers try to match supply themselves by going to the zone they think will be the best bet. When they enter a zone, they log in and get a queue number based on how many cars came there before them. There are a lot of different strategies out there (kind of like fishing in the words of the driver himself) based on avoiding drunk people, dangerous areas, getting long rides (to Arlanda) vs short ones, predicting demand ahead of time etc.
So what does the money look like?
While I couldn’t get all the numbers, I got a few. Out of what the customer is charged the division looks roughly like the following:
- VAT 6%
- Driver 35% (about 26% net), i.e. 100% performance based salary, no fixed part.
- Car owner ?% (unknown, but the drivers say it is a pretty tough business, let’s assume maybe 35% as well, which needs to cover the vehicle cost before income tax)
- Taxi Stockholm dispatch staff and orgnaization cost ?% (maybe 24% then)
On a good weekday 12 hour shift, a driver makes about 3000 SEK
On a good weekend 12 hour shift, a driver makes about 6000 SEK
On a good month a driver makes about 30 000 SEK gross/20 000 SEK net (which implies working at least 6 nights a week and probably several full weekends)
Some observations: The incentives to drive illegal cabs are really high as you can charge customers roughly the same per minute/mile but make almost four times as much net per minute/mile. On the other hand, you have no dispatch to feed you business, which means you can really only do this successfully around night clubs at closing time where demand is obvious (most hotels and airports have pretty effectively gotten rid of illegal drivers). The lack of a supply/demand function to make them competitive thus means that illegal cabs aren’t really a big problem for the taxi industry financially.
Actually, Arlanda airport has a bigger impact on the type of car that a car owner buys than the general car economy like repairs cost of fuel etc.
Arlanda airport is obviously a very big supplier of customers and they have a taxi system that very strongly incentivize environmentally friendly cars over others. Basically, when drivers arrive at the airport (or have dropped customers off) they have to queue at a site a bit away from the airport instead of driving up to a gate. There, they get a queue number based on the environmental points their car has. A car can get up to 100 points (the passat is apparently the top scoring car at something like 85 points). If you have a low score you can be sitting at the queue site for many hours and might as well not bother (i.e. drive back to Stockholm empty to find new business).
That’s it, I hope you learned something you didn’t already know…