Confusion over proposal to install taxi sign on ride-hailing cars

A new proposal suggests putting taxi signs on ride-hailing vehicles

The Ministry of Transport (MoT) has recently submitted to the government the latest draft decree replacing Decree No.86/2014/ND-CP on business and conditions for automobile transportation. Accordingly, the MoT maintains its proposal that electronic contract-based vehicles using ride-hailing platforms like Grab, Go-Viet, and Be must put ‘taxi signs’ on the top of their vehicles.

However, the proposal has caused a lot of confusion among drivers and consumers over the future of ride-hailing services in Vietnam.

Nguyen Phuong Hien, who has been working as a Grab driver for two years, told VIR that if the proposal goes through, drivers will be required to purchase taxi signs, taxi roof lights, taximeters, and taxi POS systems. Drivers will also need to pay for the maintenance of these devices. All of these additional fees will increase operating costs for both ride-hailing platforms and drivers.

Hien said that the additional fees will lead to a significant drop in drivers’ income so more driver partners might quit the platforms.

“Meanwhile, customers will see higher fares on the back of the new regulations. Customers will not only shoulder a considerable portion of the new costs, but will also find it more difficult to get a ride as drivers depart from the platforms. This is definitely a step backward just to regulate ride-hailing firms,” he added.

Another ride-hailing driver Tran Anh Tuan said that drivers will struggle to meet the new requirements as many of them took up loans to finance their ride-hailing business. Freelance drivers might pull out of the ride-hailing platforms due to lower incomes, which will increase unemployment rates and so indirectly impact the country’s economic growth, state budget, and social wellbeing.

He added that fares will definitely increase to compensate for the shortage of drivers. Commuters will not be able to fully enjoy the benefits of ride-hailing services like competitive prices and shorter travelling time. The regulatory changes might restrict the benefits that disruptive technology and businesses bring to both drivers and consumers.

Nguyen Thanh Tam, a passenger in Ho Chi Minh City, said that ride-hailing services improved the lives of commuters in significant ways through technology – from transparency in pricing, convenience, and comfort to safety. Thus, it is unnecessary to require ride-hailing vehicles to install taxi plates and roof lights like traditional taxis as customers have access to all information of drivers such as their name, photo, and license plate number through the apps.

Another passenger, Le Thanh Ngoc, said that ride-hailing services are making a difference by lowering the number of empty vehicles on the road and improving traffic flow in large cities across Vietnam. The fares will rise as the businesses are required to install taxi signs and are classified as traditional firms. As a result, more daily passengers will switch to using personal vehicles. The growing number of private vehicles on the road will lead to congestions and put pressure on the infrastructure.

Industry insiders warned that the implementation of new regulations will reduce Vietnam’s efforts to drive innovation in the 4.0 era. Technology is expected to lower cumbersome procedures and unnecessary costs while helping save time and money for consumers. Thus, forcing disruptive businesses like Grab to fit an outdated legislative framework will slow down innovation.

Julien Brun, managing partner of CEL Consulting, said that the battle between traditional taxi companies and platforms like Grab is not unique to Vietnam. Many other countries including the United States, where the model was developed first through Uber, had to resolve this legislative ambiguity.

The underlying trade-off behind such a decision is finding a way to ensure that traditional taxi companies maintain a decent level of activity while allowing other companies to innovate in order to offer better value for money to consumers.

From a consumer’s standpoint, the outcome of taking a traditional taxi, a Grab or a GoViet ride is the same. You get where you wanted to go for a certain fee. Thus, regardless of the business models of these companies, they have the same mission, address the same market, and thus can be considered as competitors and should follow the same “fair competition” rules, in theory.

“Whether these fair competition rules are clear enough is the question. If they are not clear enough in the law as it exists today, then penalising a company for not following unclear rules will set a precedent that could impede the trust of companies about their chances of being successful in the Vietnamese market,” he added.