New taxi availability rule may weed out operators' gains

Only ComfortDelgro is comfy at 80% availability level.

According to Nomura, as expected, the new standards seek to increase the number of taxis on the road, while restricting overall fleet growth.

Here's more from Nomura:

Operators who don’t meet the standards won’t be allowed to grow their fleet. There might be a financial penalty but none for the first 6 months of the programme.

We expect the standards to potentially squeeze out the less competitive operators and in doing so, advantage the remaining players by reducing competition.

ComfortDelgro: We think the new taxi availability standards are positive for ComfortDelgro as they are already achieving way above the requirements set.

We estimate that they are already hitting close to the 80% availability levels as required by the Land Transport Authority (LTA).

SMRT: It is possible that SMRT is not achieving it yet, by our estimates, based on data from LTA.

Other players: Smaller private operators are most likely going to face problems achieving it, though a different standard is set for them. We expect it to be lower but this is unstated in the LTA press release.

Despite that, it is likely that some of these players will be squeezed out or at the very least, have their relative scale reduced. This will be positive for industry as it reduces competition.

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