In the bigger cities of Indonesia taxi services are an essential part of the transportation system and an effective solution to travel in and around the city. With Indonesia's public transportation mostly underdeveloped and Indonesia's taxi tariffs among the lowest worldwide, the rapidly expanding urban middle class increasingly prefers to use taxi services instead of other transportation services. This has resulted in rising demand for taxi services and a shortage of (reliable) taxi drivers. Furthermore, the arrival of mobile applications offers new opportunities as well as threats for existing taxi companies.
There are dozens of taxi services firms active in the urban environments of Indonesia. However, only a few enjoy a good reputation. Two companies that are considered reliable are the Blue Bird Group (or Blue Bird Pusaka) with its famous blue-coloured taxicabs (taksi bluebird) and Express Transindo Utama with its white-coloured taxicabs (taksi express). Both companies are publicly-listed companies on the Indonesia Stock Exchange. Other companies that offer decent taxi services include the yellow-coloured Taxiku and green-coloured Gamya. Lastly, there are also luxury taxicabs such as Silver Bird (owned by the Blue Bird Group) and White Horse (owned by Panorama Sentrawisata), both are black-coloured. However, these luxury taxicabs are much more expensive than the common taxicabs.
Foreigners are advised to opt for blue bird taxicabs or express taxicabs as the drivers are more reliable. Similar to the situation in other countries, foreigners are an easy target to make some extra money for most taxi drivers (by not taking the quickest route, by not using the meter but charge ridiculously high fares, or by pretending not to have change). Although the Blue Bird Group and Express Transindo Utama are eager to safeguard good brands and hence instruct their drivers to give the best services to customers, most Indonesians and foreigners also experience problems with these drivers. Still, chances are much bigger that you get good services in the taksi blue bird or taksi express than in any other taxi company. Also, communication between taxi drivers and foreigners (who cannot understand Indonesian) will be problematic as few drivers speak foreign languages.
Opportunities in Indonesia's Taxi Services Industry
Although Indonesia is characterized by weak infrastructure (resulting in heavy traffic congestion in the bigger cities on Java during working days), Indonesia's taxi market offers ample opportunity for growth due to the following reasons:
• Indonesia is still characterized by a low taxi penetration ratio at only 0.24 (taxicabs per 1,000 people). In Malaysia and Singapore these figures are much higher at 3.1 and 5.2, respectively
• Indonesia contains not only a large population (approximately 250 million people) but also a population that has become increasingly urbanized, giving rise to higher taxi services demand in the urban regions. Approximately 140 million Indonesians live in the country's urban areas
• Macroeconomic growth; Indonesia's middle class is expanding and GDP per capita rises accordingly, implying that more and more people can afford taxi services
• A lack of investment in public transportation makes taxis an attractive alternative. There are various public transportation services, such as the Trans-Jakarta bus rapid system in Jakarta. However, during rush hours it can take a long time before you can enter the bus and often these buses are packed with people meaning you need to stand (and be aware of pickpockets). There are also other cheap public transportation systems in Indonesia but usually these are quite uncomfortable
• Taxi tariffs in Indonesia are among the lowest in the world, implying that relatively many people can afford these services but it also means that taxi operators have room to raise tariffs in the future, hence boosting companies' financial performance
• Tourism; foreign visitor arrivals into Indonesia have grown considerably over the past years and the government targets to welcome 20 million foreign tourists by 2019 (from nearly 10 million in 2015). If the government's target is achieved (or partially achieved) it would seriously enlarge the customer base for Indonesian taxi services providers
Threats to Indonesia's Taxi Services Industry
Fuel prices have a significant impact on taxi fares. The Indonesian government has reformed its fuel subsidy policy over the past years, making fuel prices float (more) in line with global oil prices, in order to curb costly energy subsidies and redirect them to infrastructure and social development programs. Although global petroleum prices are currently still low due to the supply glut, in times of rising oil prices, Indonesian taxi services companies will need to adjust taxi fares upwards (whereas in the past they could rely on subsidized gasoline).
Another problem includes reduced taxi services demand due to people's curbed purchasing power amid Indonesia's economic slowdown and high inflation. These issues discouraged Indonesian taxi services companies to invest in business expansion. However, inflation is expected to ease to around 3 percent (y/y) at end-2015, while the country's gross domestic product (GDP) growth is estimated to rebound in 2016.
The government has increased spending on (or non-financial support for) infrastructure development, including public transportation. In the capital city of Jakarta construction of the Mass Rapid Transit (MRT) has started, while a railway link on the busy route between Jakarta and Soekarno-Hatta International Airport, located just outside Jakarta, is in the pipeline.
Lastly, Indonesia has been plagued by weak (quantity and quality of) infrastructure due to the lack of investment. In a big city like Jakarta it can take hours to travel a short distance by car or bus during rush hours, making it more attractive to use a 'motorcycle taxi'.
Two Dominant Players: Blue Bird Group and Express Transindo Utama
Indonesia's taxi services industry is dominated by the Blue Bird Group and Express Transindo Utama. Blue Bird, with a fleet of about 32,500 taxi units, is the clear market leader commanding a 43 percent market share, while Express Transindo Utama (with a taxi fleet of about 11,000 units) comes in second place with a 30 percent market share. Express conducted an initial public offering (IPO) on the Indonesia Stock Exchange in 2012. Blue Bird followed suit two years later.
Performance Blue Bird (BIRD), Express Transindo (TAXI) and Jakarta Composite Index (JKSE):*
* normalized stocks, 1 January 2015 = 100
Arrival of Mobile Applications for Transportation Services
Indonesia's traditional taxi services companies have seen the arrival of new competitors with the introduction of mobile apps. Not only is it much easier to call a taxi using a mobile app, but it is also cheaper. For example, US-based transportation network company Uber (which operates in 57 countries and entered the Indonesian market in mid-2014) offers a tariff that is about 30 percent cheaper than regular taxi fares. Through a mobile app, Uber connects the customer with a driver by collaborating with rental companies (Uber obtains a service fee for each payment). The company mainly focuses on Jakarta but has expanded to Bandung (West Java) and Bali.
The arrival of mobile app players in the domestic taxi services industry caused some controversy as these services were poorly defined and regulated by Indonesian law, some claiming that these mobile app players were illegally engaged in the taxi services industry. However, the Indonesian Transportation Ministry has granted temporary operational licenses to these players, while still drafting new regulations for e-commerce businesses, meaning that these new competitors are here to stay and undermining the position of existing taxi services companies.
Updated on 4 November 2015