The struggle to survive in the Ethiopian cab hailing market

One of the thousands of blue cabs that are struggling to survive

To Tsegaye Tesfaye, a 40-year-old cab driver who currently works for Ze-Lucy Meter Taxi S.C., and others in the same profession, online transport hailing and booking platforms have become disruptive forces to the livelihoods of individual and small-scale cab services over the past five years. The first of these platforms in Ethiopia was provided by Zaytech IT Solutions under the name ZayRide in 2016.

Since Uber, the ridesharing pioneer from the United States was first established in early 2009 and exploded in popularity over the last decade companies worldwide have looked to emulate the hugely successful service, and Ethiopia is no exception. The introduction of ZayRide boded ill for the signature blue cabs of Addis Abeba and people like Tsegaye.

The ease of use, standard pricing, enhanced security, and increased availability have since led to the emergence of 22 cab hailing companies in Addis Ababa. The benefits of these companies have influenced consumer behavior as well with people generally preferring to whip out their smartphones and find transportation instead of flagging down a cab and hassling over prices.

Cab hailing companies in Ethiopia are licensed in two ways, either as Electronic Taxi Dispatch service providers or Taxi Operation Associations. The first category is for companies like Hybrid Designs PLC subsidiary, RIDE, that provide online cab-hailing services but do not own their own vehicles while the second is for those that provide the services as well as vehicles. RIDE is currently the biggest competitor in the market with more than 16,000 vehicles at its disposal.

Despite the challenges that the emergence and rapid growth of this market have created for the blue cabs that are considered part of the history of the city, it has also presented opportunities for those willing to take it. Many like Tsegaye have abandoned their individual work and either bought new vehicles or joined companies that provide their own. Others have joined organizations like Taxiye, which was established last year, which is also playing the role of ‘blue cab unions’ by including a large number of them in their fleets.

An aspect of the struggle that this dynamic still entails is illustrated by Tsegaye’s experience, however. While his main services go to Ze-Lucy, he works with RIDE and FERES to maintain his living. This is a product of other economic realities in the country such as inflation and of realities unique to the market like the brutal competition that arises from the over saturation of drivers.

Abenezer Alemu, a contractor for RIDE, confirms that ride does not allow contractors to work with other service providers but also affirms that he does not care, given that that is his best survival option. Fierce competition has become synonymous with the market not only for contractors but for businesses as well.

Service providers are having to come up with creative means to draw customers to their business such as reducing starting prices, reducing price per kilometer, focusing on social impact (like gender issues), providing mileage points, providing co-ownership options for drivers, or not extracting commission payments from its drivers.

Mulugeta Gebremedhin, a lecturer at Addis Ababa University, on the other hand, affirms that the gap between supply and demand still makes it difficult to implement more stable marketing strategies. Besides this gap, however, the price of these services is relatively high compared to other countries like Kenya. Mulugeta cites the higher prices of vehicles, fuel, and commission payments as possible contributing factors that need to be looked at in the near future.

Addis Fortune

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