Himanshu PatelDespite the fluctuating economic climate of Middle East, the minibus taxi service, that’s used by 69% of households is continued to be resilient, defensive, and growing, and expected to worth around R50 billion by 2020.
The taxi business is the most lucrative opportunity in this region. The new entrants even the ventures with a few drivers and vehicles can also get an edge as they grow. Most of the taxi businesses are innovating with a mobile extension to change the marketing game and gain the maximum number of bookings.
When we take an inside view of the taxi industry in the Middle East, there are a couple of things that boost the idea of building a Uber-like taxi app, which is- the transportation needs of the unusual routes and irregular schedules is served;
- leisure and business travel is a part of most of the income and revenue;
- three-fourth of the population rely mostly on minibus taxi for public transportation;
- the 8 out of 10 individuals will live in urban areas and depend on a taxi for their commute needs by 2025;
- the yearly turnover of the taxi industry lies between R60 to R90 billion.
It’s overwhelming! There is absolutely no reason to not jump onto the taxi bandwagon.
Here’s how you can Get Started
The taxi business cannot be started without acquiring a couple of certifications from the taxi association built by the Middle East government to keep the business profitable. The route license is the most important certification where the details of vehicles and drivers, and the route to-be-used are maintained in a database by the taxi association.
The local authorities divide the routes and supervise them to ensure there should be an optimal number of taxis for a particular route so that the business gets equal opportunity to make money and no conflict or issues emerge among drivers.
How To Approach For Business Registration?
When done with the certification, the next step is to devise a plan for a fleet of the taxi, taxi management, funding, and the paperwork, which varies from one region to another. The final step is to register the business with the right agency such as the department of transport, intellectual property registration, and department of labor. Post-registration, the business is entitled to deploy a specific number of vehicles in the city as defined by the law of transportation companies of a particular country.
Read more : How To Win Against Uber ?
Note: When the taxi business is set up in the free zones of Dubai, the paperwork, taxes, and customs duty will get reduced. Just by determining legal entity type, trade name selection, applying for a business license, office space selection, pre-approvals, and completing business registration, the business will get the license (After paying R350,000 to taxi association as license fee) to put the vehicles on the road and gain the rides booking.
Don’t overlook the regulations defined by Middle East countries because the regulation violation may lead to entire business suspension. The Uber and Careem have faced suspension in 2016 in Abu Dhabi because a few drivers were found violating regulation and then imprisoned. However, taxi businesses have managed to restart the taxi service after a couple of months.
Read more: Technology Stack that Goes Behind On-Demand Taxi App Solutions
How to raise the capital?
Respecting the eco-friendly wave of hybrid cars, the taxi business is replacing electric cars with hybrid cars. 50 Tesla electric vehicles that are officially taken off for the limo Fleet by Dubai’s Roads and Transport Authority (RTA) is a great instance of it. The same is followed in UAE where 1,590 Hybrid cars are added for the taxi transportation services.
Also, Nissan or Toyota like taxis are commonly used that costs around R34000, which is quite expensive. Well, it’s not essential; an entrepreneur with a few minibusses can also get an entry to the taxi market and start providing taxi services. It has become a top reason for market saturation and intense competition. Still, the lack of funds won’t allow the entrepreneurs to create innovative marketing strategies and uplift the income.
There is a slew of methods to get capital or finance for the taxi business:
The Commercial Banks: Many commercial banks that provide the funds to the taxi businesses to execute the marketing strategy with the apt number of vehicles. The entrepreneur should present a well-structured business plan for the taxi business that showcase you have all the qualifications to successfully run the business. Besides, the assets or collaterals are kept for security purposes before the loan-approval.
IDC: The Industrial Development Corporation is a financial institution of Middle East that’s aimed at the economic empowerment of the Middle Eastn population.
In the same vein, it provides funds for the vehicles, accessories, and transportation items to the entrepreneurs who wanted to start a new venture, which promotes their economic prosperity as well. The loan repayment term falls between 5 to 10 years based on the profit and risk associated with the business.
Khula start-up fund: In Middle East, the Khula Credit Indemnity Scheme was established for the start-ups, SMBs, and historically disadvantaged business owners that don’t have sufficient assets to get funding from commercial banks. The individual business applications for funds are assessed to measure the possible return and risk from the business to-be-setup before approving the loan.
The funds between R150000 to R3 million are provided to the businesses with a loan repayment period of 3 to 8 years.
What’s more? Let’s Do a Quick Analysis of Middle East Countries Economy
It’s already mentioned before that the taxi business stays at the heart of Middle East’s economy, that’s bringing livelihoods to nearly half of its citizens. The economy is having a direct impact on the taxi business by road conditions, fuel prices, and fares.
From the insider’s perspective, the 60% of the population relies on the minibus for the commutation, which is not safe, drivers rarely follow the road rules and overloading the taxis with a large number of passengers. It seems the unregulated taxi industry is creating a bad impression on the visitor’s mind and there is a dire need for implementing strict regulations.
Additionally, the lucrative routes, right attitude of the drivers, road rules following and fair taxi fees are some of the characteristics when made possible in the taxi business. It creates a unique opportunity for budding entrepreneurs to thrive in the market.
There is something more! The Benefits with Business taxi App development
When we look at the high-performing taxi apps that have started their journey as start-ups like- Careem and Talabat, it seems that on-demand taxi solution works wonder in the Middle East countries. The plethora of advantages that convince you of the same:
- In this region, finding semi-skilled and unskilled workers is an easy task, that’s why you don’t need to spend a lot of time and effort in finding drivers.
- Enhancing the taxi business presence and increasing the number of bookings in the market becomes possible with online visibility.
- The taxi service industry is contributing a major share in the Middle East countries’ economy, which will have a direct impact on taxi services offered.
- With taxi apps, when the Uber-like taxi model is employed, the entrepreneurs don’t need to invest huge bucks on buying a fleet of vehicles.
The final words
When the last five years of performance of the taxi business is viewed in Middle East, continuous growth is experienced, despite the challenging economic environment. The competitive pricing, reliability, and high accessibility have enabled the start-ups to tap the opportunity and enjoy the advantages in galore. However, everything is not so rosy.
However, the cultural difference, citizens’ behavior, and varied regulations compliance have made things a little trickier for the new entrants in this market. The little mistakes are also sometimes considered offensive and the business can be suspended, so everything must be handled carefully.
It’s better to get connected with a company that provides necessary consulting services for the taxi app development and helps you with app building too when everything goes well.
