Death of an Industry: The Indonesian Taxicab

The iconic blue Indonesian taxicab

By Nicolette Hendrawinata

The sleek blue taxicab featured prominently in my favorite childhood memories of Jakarta. Wanting to avoid the hassle of finding parking spots in the crowded shopping malls, my parents would book a cab to transport our family to the capital for a much-coveted weekend trip. In a developing Indonesia that lacked public transportation infrastructure, the taxicab provided a reliable, relatively safe, and comfortable alternative method of transit.  However, the golden age of the Indonesian taxi soon met an abrupt end as the country experienced a digital revolution that drastically changed its transportation landscape.

Over the past six years, the introduction of online ride-hailing services like Gojek, Grab, and Uber has rendered the conventional taxi nearly obsolete. The taxi, with its traditional metering system and call-by-phone order, was not able to compete with the price, convenience, and relentless marketing afforded by these booming technology companies. Thus, in the wake of Indonesia’s digital transformation, violent protests marked a painful transition period as thousands of taxi drivers lost a large chunk of their consumer base. The situation was then exacerbated by city-wide COVID lockdowns that went on for weeks, further decreasing ridership for both traditional and online taxis. 

The rising era of online ride-hailing services

Even though applications like Uber had been widely used in the United States since 2011, online ride-hailing only became popular in Indonesia with the entrance of the Malaysian startup application GrabTaxi (now known as Grab) in 2014. Grab was soon followed by the local startup Gojek, who leveraged the popularity of its online motor-taxi to launch the ride-hailing service Go-Car. Uber had briefly entered the Indonesian market in August of 2014, before acquiescing its entire Southeast Asian operations to Grab in a profitable 2018 deal that allowed them to invest in more lucrative markets.

Online ride-hailing services proved to be an intense competitor for the conventional meter-based taxi. With their efficient system of matching online demand with supply, ride-hailing services bested traditional taxis in terms of wait time and convenience. Many consumers also preferred the early determination of prices in these services because it prevented drivers from taking unnecessarily long routes to increase meter rates. Most importantly, ride-hailing services were not subjected to transportation taxes or fleet maintenance costs, thus enabling them to charge significantly lower rates than regular taxis. 

The efficiency of online ride-hailing services disrupted the country’s transportation landscape, causing a sudden and sharp decline in the taxi’s popularity. According to a 2019 survey done by the Indonesian Consumer Community, 40% out of 625 respondents chose online taxis as their most frequent mode of land transport, while only 8% chose conventional taxis. As a result of this consumer shift, taxi industry leader Blue Bird reported an approximately 38% decrease in profits even as early as 2016, and the second-lead Express reported a loss of Rp. 42 million in the same year.

These numbers declined even more as the industry suffered a potentially deadly hit from the COVID crisis. Even though the taxi was not the only public transportation that saw a dwindling in usage since the first local Indonesian lockdowns ensued in early 2020, the 60% ridership decrease was particularly devastating for the already struggling industry. Accordingly, the end of the second 2020 quarter had Blue Bird reporting yet another 25% decline in revenue while Express reported a 75% decline and a 50% cut on staff salaries. Without any plans for a radical business change in the foreseeable future, it seems that the taxi industry’s fate might as well be sealed.

The devastating impact on drivers and subsequent protests

In the wake of the Indonesian taxi’s rapid digitization, conventional drivers suffered the brunt of the consequences. In 2017, for example, huge losses forced the taxi company Express to discharge 250 drivers. Meanwhile, in an interview with Guardian, another driver reported that his earnings have declined more than 60% since the arrival of the online taxi. The impact was especially devastating as many conventional taxi drivers came to the city from rural parts of the country, and therefore required a continuous livelihood to send money back home to their families.

Not only that, the transition from driving taxis to driving for online ride-hailing services was tumultuous and expensive. Most conventional taxi drivers were bound by a contract to lease vehicles from companies for a certain period, but a reduction in income made it impossible to pay off the lease quickly while supporting their families. To successfully switch to online taxis, drivers also have to scrounge up a substantial amount of investments, including renting or purchasing a car and shouldering its fuel and maintenance expenses. Consequently, low-skilled drivers who have minimal experience in other fields were trapped in a precarious situation with seemingly no way out. 

Dissatisfaction with unfair circumstances finally boiled down to massive driver protests that lasted from 2016 up to early 2018 in some regions. Although these protests eventually resulted in more clear-cut regulations controlling online vehicles, they arguably did more harm than good as the violent actions of a small portion of drivers further hurt consumers’ perceptions of conventional taxis. A consumer who missed her flight because of the congestion caused by these demonstrations, for example, told Aljazeera that she felt hurt by the rowdy protests and hoped that the government would protect the cheap and easy-to-order Uber instead. The writing on the wall was clear: even the drivers’ most extreme cries of plight couldn’t win the sympathy of customers already wooed by the low price and convenience of ride-hailing services. 

Conclusion

Looking forward, the  decimation of the taxi industry by ride-hailing services seems to be just the beginning of a recent trend as Indonesia continues to develop its nascent digital landscape. With an expectancy of 150 million internet users by 2023, it seems inevitable that this huge consumer shift will not only create new jobs but also displace older occupations that are deemed redundant. To avoid future tumultuous market shifts, as seen with the taxi industry, the responsibility now lies on the government and private companies to set up necessary support structures for workers, especially those with minimal skills and resources.