[Herald Interview] ‘Low driver pay is the root cause of taxi crisis’

In recent months, a severe taxi shortage saw people hailing a taxi on the streets of Seoul to no avail while ride-hailing apps like Kakao T failing to dispatch a driver, especially during nighttime peak hours.

Between 10 p.m. and 2 a.m., only one 1 of 4 attempts to call for a taxi succeeds, according to Transport Minister Won Hee-ryong last month.

The taxi crisis is blamed on a number of factors, including a sudden post-pandemic spike in demand and a reduced driver pool after many switched over to delivery services.

But Lee Sung-wook, who founded a premium van hailing app i.M, says the low pay of taxi drivers is the root cause of all.

“The rising living costs have affected taxi drivers and companies -- their food, their fuel, their car and education for their kids. Yet there has been pressure to cap taxi fees for the last 30 years,” said Lee, co-CEO of Jin Mobility Co., the company behind i.M, during an interview with The Korea Herald earlier this month.

“In the current environment, it has been difficult for drivers and business operators to make profit, discouraging people from entering the industry.”

For Lee, taxi service has been a family business for nearly 50 years.

Following in the footsteps of his father, he launched i.M in 2020, with an eye on the premium segment.

He believed that there was customer demand, left unfulfilled for too long, for high quality services in terms of safety, cleanliness and reliability.

“There has always been demand and people who are willing to pay more for a better service. I think members of the public now have enough economic power to pay more for a taxi ride,” he said.

Fares for a regular taxi in Seoul, set by a public-private joint commission on consumer prices, start with a basic charge of 3,800 won ($2.88) for the first 2 kilometers before the taximeter starts charging 100 won every 132 meters. 

i.M White, which is a cheaper option of the service, has a basic charge of 4,000 won for the first kilometer. After that, it charges 100 won per every 120 meters, the CEO explained. Premium taxis are subjected to a different, more flexible pricing schemes than regular taxis.

i.M currently boasts 1,000 drivers and about 1,200 vans, directly managed by the company.

Direct management means quality control, the CEO said. It is what sets it apart from competitors like Tada and Kakao T Venti in the premium van hailing segment, he added.

Called “genies,” i.M drivers have to follow its set of rules, go through its own training program and can receive incentives, or penalties, from the company.

They are also much younger than traditional taxi drivers, with the average being early 50s. Over 75 percent of them are new to the industry and had not been a taxi driver in the past.

“My goal is to create a company where drivers can make a monthly average salary of 4 million won,” he said.

Nearly half of its customers are also young women in their 20s and 30, most of whom are using the van for their journeys alone, the CEO explained.

As mobility services emerged in recent years, legal grounds were established in Korea, Lee said, paving the way for traditional taxi companies to innovate themselves by adopting the latest technologies.

They also face a new competition – ride-hailing apps often run by IT firms.

Given their large pool of drivers, Lee is confident that taxi operators could have the upper hand in the competition with major tech firms so long as they are quick enough to adapt technologically.

But the industry will continue to face challenges if the current government policy on taxies remains unchanged, he noted.

Addressing the acute taxi shortage, Transport Minister Won shared some ideas for a possible solution. They included allowing more flexibility in taxi fares during the night, a surcharge of 25 percent to 50 percent for example, and introducing other mobility services such as demand-responsive transport or an alternative similar to Uber.

Uber entered the South Korean market in 2013 but withdrew from it only two years later, after facing backlash from taxi drivers and being deemed illegal by the government.

About the ministry’s ideas, Lee was apparently unexcited.

Lee does not see a point in allowing mobility services like Uber in the country where regular drivers can work as gig workers similar to delivery apps.

“It’s hard to imagine people wanting to have a side job driving their own car for a price lower than taxi fares all night long before they go to their day-time job in the morning.

“Fundamentally, the industry needs to raise fares by 20 to 30 percent,” he said.

By Yim Hyun-su (hyunsu@heraldcorp.com)