The taxi service sector in the Chinese city of Guangzhou could see consolidation ahead of the 2010 Asian Games, as the local government would prefer that the three large state-owned companies acquire their smaller peers. A government source said the move was aimed at improving the efficiency and service quality of the city’s taxi sector.
GJ Tourism Vehicle Group [Guang Jun Lu Qi], Baiyun Taxi [Bai Yun Chu Zu] and Guangzhou Transportation Group [Guang Zhou Jiao Tong Ji tuan] are the three largest taxi operators in Guangzhou, and are all state-owned companies. Aside from the three major players, there are over fifty small, privately-owned taxi operators.
The source said the Guangzhou government expects a large number of foreign tourists to travel to Guangzhou for the 2010 Asian Games, adding the government saw it as an opportunity to promote the city’s image. “Taxi services leave a huge impression on the tourist, so we want to improve its quality.”
The Asian Games is a multi-sport event held every four years among athletes from all over Asia
The source said the government wanted the three state-owned companies to acquire their smaller peers and reduce the total number of taxi companies to around 20.
A second government source said the Guangzhou government has had this idea for some time, as local citizens often complain about the bad service from smaller taxi companies. He said the three large players are backed by the government, so they have better sedans and the drivers receive formal training. As for the smaller companies, there have been cases where they over-use the taxi cabs and recruit migrant workers as drivers to save costs. “So in many cases, the driver will need to ask the passenger to point out the direction [of the location] to them. This might work for local citizens, but it does not work when the passenger is a foreign tourist,” the source said.
An industry source said improving services was only part of the consolidation's goal, as the government also wanted to tighten its control of the sector. He said in December 2008, over 2,000 taxi drivers went on strike as they wanted the traffic bureaus to reduce the monthly fee for taxi licenses. He said apart from the three state-owned taxi companies, almost all of the other remaining taxi firms in Guangzhou had joined the strike. “After the strike, I think the officials found that they should have more control of the sector so as to prevent similar things from happening again.”
A second industry source agreed with the first, adding that Baiyun had been scouting for possible targets over the last few months. He said small firms like Jianfu Taxi, Lishifeng Taxi and around twenty other smaller companies were all among possible options.
The first industry source said a taxi license was worth around CNY 200,000, and each taxi and the cost of relocating a driver could cost another CNY 200,000. So the value of the acquisition is related to how many taxis the target owns. He added that Jianfu has around 200 taxis, so a deal size for it could reach CNY 80m (USD 11m).
GJ Tourism has around 1,900 taxis, Baiyun Taxi has over 2,200 while Guangzhou Transportation Group has nearly 2,000 taxis.
By Wentao Wang in Guangzhou
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