Will ComfortDelGro cut taxi rental rates to attract more cabbies?

Its taxi fleet idle rate is still close to 0%.

Transport group Trans-cab announced its taxi rental cuts ranking between -22% and -35% for one-man operation taxi-hirers to battle lower fleet idle rate in the shortest time possible. But does this affect ComfortDelGro's taxi business too?

According to OCBC Investment Research, ComfortDelGro is not expected to engage in direct rental rate cuts because of two reasons: its taxi fleet idle rate is still close to 0%, and its continuous fleet renewal programme helps justify the higher rental rates.

"That said, CDG is also not sitting still as it is gradually shifting taxi operations from fixed rental rate to revenue risk sharing model. In short, taxi hirers pay up to 50% lesser in rental rates but CDG takes a cut in their fare revenues. We believe this will help ease the hirers’ cost burden, which greatly reduces risk of hirers switching out, and with CDG still (partially or fully) compensated through the revenue sharing mechanism, we believe the impact of revenue decline will at least be partially mitigated," the brokerage firm stated.

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