A SHANGHAI public hearing on a taxi fare increase has highlighted the plight of cab drivers working long hours, earning meager incomes, paying high rental fees to taxi companies and competing with unlicensed, private transport services booked by smartphone. Cabbies have staged strikes in several cities around China.

The Shanghai Transport Commision, in a report released on January 9, said city cabbies earn an average 6,555 yuan (US$1,058) a month, about 1,000 yuan higher than the average Shanghai wage. However, they generally put in much longer hours and get fewer holidays than other city workers.

The report also said the profits of Shanghai taxi companies are on the decline. One cab generates an average of 671 yuan net profit per month for a company, compared with 1,022 yuan three years ago.

What’s gone wrong? Driving a taxi used to be a respected, reasonably paid job. Shanghai’s taxis won praise from residents and visitors alike for honest drivers and courteous service.

That image now hangs in the balance. Customers complain that service has deteriorated. Taxi companies complain about rising overhead costs. Cabbies complain their incomes shrinking. And apps such as Uber, which allow consumers to use mobiles to book private cars without taxi licenses, have eroded mainstream business. China’s Ministry of Transport last week banned that practice.

Raise fares

The Shanghai Transport Commission is seeking public input on two proposals that would raise taxi fares in the city. Option 1 would raise the flag fare by 1 yuan to 15 yuan. Every kilometer after the first 3 kilometers would cost 2.5 yuan, a 0.1 yuan increase over the present fare schedule. Option 2 would keep the flag fare at 14 yuan but increased the cost of each additional kilometer beyond 3 kilometers to 2.7 yuan.

A public hearing was held on January 9, where 24 cabbies, lawmakers and customers discussed the options. Seventeen participants favored the first plan, with the remainder backing the second.

Haibo Taxi Co driver Zhang Lin told the hearing that he has to work up to 20 hours a day, three or four days a week to earn a decent salary.

“We earn about 50 yuan an hour on average,” he said. “But after I pay the company and buy fuel, the net profit for me is about 20 yuan.”

“If the fare rise is approved, I could earn 60 yuan more every day,” Dazhong Taxi Co driver Yu Qunpeng told Shanghai Daily.

Yu, a Shanghai native in his middle 40s, said he has been a cabbie for more than 14 years and shares his taxi with another driver, alternating days off.

“I’m out almost the whole day when I’m working,” Yu said. “I drive to my partner’s house at 5:30am and he takes me home before starting his shift. At 5:30am the next morning, he drives to my place and I take over the wheel. Sometimes if I’m really tired or business is slack, I’ll pull over for a nap.”

Meals are hit-and-miss.

“I try to eat when I feel hungry,” Yu said. “But it’s hard to follow a timetable when a fare can delay a restaurant stop.”

Yu said he earns about 1,000 yuan a day. He pays 5,400 yuan to Dazhong every month, and one day’s driving consumes about 250 yuan worth of fuel. He said that leaves him daily income of less than 400 yuan, under 6,000 yuan per month.

Yu said he used to work for a smaller company before joining Dazhong, one of the big four taxi companies in Shanghai.

“Passengers prefer big company taxis,” Yu said. “But big companies have a large management system and thus high costs. Those sitting in the office earn the same as I do for much less work.”

Some city officials suggest that inefficient management in taxi companies is contributing to the current crisis.

“Taxi companies should look into cost management and share profits to a greater extent with drivers instead of simply seeking fare hikes,” said Tao Ailian, executive deputy secretary-general of the Shanghai Consumer Rights Protection Commission.

Guan Lu, a management office staffer at Dazhong, told Shanghai Daily that the company has lowered its monthly car rental fee for drivers several times in recent years, under pressure from the transport authority.

New business models

Guan said the majority of the rent drivers pay is spent on car maintenance, taxes, car insurance and social security contributions for drivers.

After these costs, Dazhong is left with about 100 yuan per car per day, the bulk of which is swallowed up by its staff and operational expenses.

Dazhong has about 8,000 taxis and 19,000 drivers. It says it has been exploring new business models since 2012.

Cabbies can buy five years of operating rights to a car by paying 120,000 yuan upfront. Under the plan, each car must turn over 3,000 yuan a month to the company during the contract. They pay their own contributions to social security and finance all car maintenance.

Alternatively, they can pay an additional 1,000 yuan a month to Dazhong to handle maintenance.

According to Guan, the new model now covers about one-third of the company’s cars. It has helped lower management costs and give drivers more freedom in arranging their own work schedules, he said.

However, many of those taking up the offer say the upfront fee puts financial pressure on them, and the jury is out on whether higher income will result over the long run.

“The taxi industry is facing difficulties never faced before,” said Qi Peihong, deputy director of the Shanghai Taxi and Car Rental Association.

He said the long hours and lean returns make taxi driving a less attractive occupation for the younger generation. In 2009, over 10,000 people took the Shanghai taxi driver exam. The figure fell to 3,538 in 2013.

“There are already vacancies, with some taxi companies finding it hard to recruit drivers,” Qi added. “Few Shanghainese want to drive cabs now.”

Service is dropping

Over the years, residents from poorer, more suburban areas, like Chongming County and Qingpu District, have filled the ranks of cab drivers. However, as current cabbies quit, the taxi companies are often forced to recruit from outside the city, hiring people unfamiliar with Shanghai’s street system.

The level of service is dropping, too. That has prompted increased complaints from customers, who gripe about cabbies cherry-picking fares to weed out the short, less profitable trips. Some drivers try to stretch the meter by taking unnecessary detours. Others irritate passengers with their sour attitude or messy cab interiors.

A fare rise increase is expected soon, but some experts say higher cabbie income is not necessarily the best way to rebuild Shanghai taxi image.

According to the Shanghai Transport Commission, the 94 licensed taxi companies in Shanghai were operating 44,871 taxis with about 84,000 drivers at the end of 2013. With the city’s rapid expansion, the number falls short of demand.

“The transport authority should either increase the number of taxis or explore more innovative ways for taxies to be managed,” said Tu Haiming, a local political advisor. “The taxi business is still monopolized by companies largely ‘protected’ from outside competition by municipal authorities.”

The transport commission recently began cracking down on private cars providing “tailored taxi services” through third-party booking applications.