The Chinese Taxi Model: Background
- China has many cities of over 2M population, typically provincial capitals, separated by 1-3 hour drives. Examples are, Ningbo-Hangzhou-Shanghai, Nanjing-Wuxi-Suzhou-Shanghai, Harbin-Changchun-Shenyang, Shenzhen-Guangzhou, Beijing-Tianjin -- think NY-Philly-Baltimore-DC in US)
- There are bus and train services linking these medium sized (2M+ population) cities, but often the schedules are not as good and tickets hard to get during long weekend or breaks (situation probably worse for US)
- So taxi services are quite popular, costing RMB300-600 per one-way trip. In addition, there are also taxi-pooling to fill the market between taxi and bus services. These are loosely organized among drivers themselves, or sometimes with agents specializing in luring customers who couldn't get a train or bus ticket
The Chinese Taxi Model: The innovation is to ask the passenger to switch to a car coming from the opposite direction around the mid-point of the path, so that both vehicles only have to drive half the distance and can return with full load of passenger as well. This way both vehicles can save fuel costs, time, depreciation and even toll by halving the mileage, and part of the savings given back to the passenger via a price discount
- The passengers are typically charged at a discount (maybe 30%) to the full-trip taxis, but are told about that there will be a switch of vehicle -- (they are very confident that theywill find a car to switch with in long weekends, which means there is already a cirtical mass and scale in the network)
- In the case of China, the drivers usually skip the divided highway and instead drive on the undivided highways which usually run parallel to the toll highways. so that when he sees a likely counterpart approaching, they will flash the high-beam and there is mutual understand to stop by the road-side. The problem is that it is almost impossible to swap passenger on a divided highway, but as we will discuss later, with mobile internet and better planning, we can make it work in divided inter-states as well
- The passengers then switch car and neither driver owes the other any money, so that each takes what his original passengers paid
- There have been "return taxi pools" in almost every cities, (in many airports as well, e.g. taxi's at Shanghai going to Suzhou) where drivers try to fill passenger in their return trip, at a small discount. But the uncertainty is high and drivers usually have to line up and wait for half a day
Mobile internet can greatly enhance the efficiency of this model
While this is a great innovation, and proven in practice (according to passengers and drivers I have talked to), especially between cities with undivided highways where traffic is light (esp in Northeast China), the match-making is not as easy elsewhere. But mobile internet (Sromi) can change all that. Moreover, it can be applied to everybody, not just taxi drivers, e.g. parents who are driving their children to school after long holiday, or even shorter range lifts.
There are two types of match-making
- Pre-trip arrangement: look for people who travels the reverse direction and make appointment on a gas station (or rest area) near the mid-point in a specific time. Good certainly, but potentially some waiting time if there is traffic delay or unexpected event from either side
- Mid-trip ad-hoc arrangement: when unexpected event happens in method 1, or for those whose schedules are more unpredictable. Arrangement can be made instantaneously at rest areas (e.g. those on Inter-states-95 between Philly and DC where N and S bound share the same rest area), or when one driving and is about 20-30 minutes before the "mid-point".
The technology and the match-making process (customer experience) is almost exactly the same as that I described previously in "Hitchhikers of America - a business concept". In fact, google has some beta service called ride-finder already, mainly for taxi drivers, though they haven't yet combines this with eBay style match-making.
Unlike the previous case for ride-share or carpooling, the inter-user relationship is a lot simpler. This time both sides are both drivers and passengers, and there is likely to be no cash transaction involved and hence less complexity due to pricing. (except a match-making fee of $0.50-1.00 charged by the match-maker who keep track of user-reputation-rank/etc, and even this fee could be sponsored in part by government who encourages energy saving and reduce global warming). Also note in this application of Sromi, locational service such as GPS or Mobile Basestation Triangulation plays a bigger role, esp for ad-hoc match-making.
An enhancement of this model is that it can apply for longer distance hitchhiking, if rest area becomes a car switching hotspot. It can also increase the feasible lifting distance, i.e. now that a 4 hour drive will only take up 2 hour to complete for the driver.
p.s. Digression of why we see innovation from developing countries like China, I think it is a direct result of the different economics in these markets
- Labour cost and time is cheap, compared to fuel and equipment (car). People are willing to make small trade-off of cost over convenience (switching cars in this case -- see also previous discussion on de-aumotation in China). As oil price reaching $67/barrel, there is more similarity to the relative economics in US now
- The innovation in China was probably there for a few years already, since they did not tried to use mobile phone at all. Perhaps it turns out that the ad-hoc match-making on the undivided highway works better, as passengers do not have to wait at all.
- An unrelated, but similar observation of how a different market environment can change business practice is HK, where the high rent has driving up sales/area to be many times higher than, e.g. US. It also helps to explain the low BigMac price in HK, the rents, labor cost per unit sold is much lower in HK, because of extremely high utilization