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Home > Business > Special

Radio cab = Road to wealth

Anagh Pal, Outlook Money | May 18, 2007

As the aircraft lands, do your stress levels climb at the thought of haggling with an obstinate, or worse, offensive, cabbie? Have you ever cursed a black-and-yellow taxi on a sweltering summer afternoon for delivering you to a major meeting more asleep than alert?

If your answer to either question is yes, we won't hold it against you if you missed the business opportunity staring you in the face. Some people may have beaten you to being the first in the arena, but the time is still good for the radio cab business.

What's a radio cab? Radio taxis are cabs of international standard that are increasingly visible on the streets of major Indian metros. Comfortable, air-conditioned, responsive and professional, these 24x7 services are accessible on a single central number. On receiving a call for a pick-up, the reservation centre uses its GPRS screen to direct the nearest available taxi to the client and informs him of the time the taxi is expected to take to reach him.

Costs are calculated on a kilometre basis, from pick-up to drop-off.

While several cities have on-call cabs with radio communication devices, only taxis equipped with GPRS monitors and two-way communication systems with the central reservation centre are bona fide radio cabs.

Satellite technology and other features make them the preferred mode of transport for tourists and business travellers. Safety of passengers is ensured by the fact that radio cabs are constantly monitored at a central office and its drivers are not only trained but their identity is also verified before they are recruited.

At this point, there are three players in the field in India: Easycabs from Carzonrent India, the master franchisee for Hertz International, Megacabs from Mega Corporation and Metro Cabs.

Cabs vs radio cabs. Although three companies are already in the game, the lack of reliable, safe transport in the cities still makes radio cabs a viable business option.

"There are about 55,000 metered taxis in Mumbai, 18,000 in Kolkata and 4,500 in Delhi. Auto-rickshaws number 30,000 in Delhi and 15,000 in Mumbai," says Rajiv K. Vij, CEO, Carzonrent. Smaller fleets ply in other cities.

But no matter where you are, you'll find taxis and autos badly maintained and the drivers autocratic. Many refuse to ply by the meter, others refuse to go to the destination of your choice. Safety is also a major concern, with robberies and even murders by taxi-drivers reported occasionally. None of these problems can be wished away overnight. Radio taxis would thus address a very real need and may even serve as a model for public transport.

Rajiv K. Vij 48 CEO, Carzonrent Vij plans to expand the operations of Easycabs in Delhi, and take it to Mumbai, Hyderabad, Chennai, Pune and Jaipur.
"Overhaul of taxi services in the next 7-10 years will see 4,50,000 vehicles being retired, mostly taxis and autos. That opens up a $2-billion opportunity.
Initial investment: Rs 375,000
Expected profit per annum: Rs 447,000

The growth potential. With the economy on the upswing, consumers are increasingly opting for better services, even if they cost more. That is the market radio cab operators seek to capture. "The industry assesses that city taxi services will be overhauled in the next seven-10 years," says Vij. "That means almost 4,50,000 vehicles - mostly taxis and autorickshaws - will be retired across the country. That opens up a $2-billion opportunity."  

The potential of the market is the reason why Megacabs, for one, is still around. Though it started operations in Delhi in 1999, business did not take off till 2006 because of policy hiccups. Now, it has 281 cars and plans to launch services in Mumbai and Goa in the next couple of months and in Chennai, Bangalore and Hyderabad by the end of this year.

Carzonrent, too, is planning big. Apart from expanding operations in Delhi, Vij plans to take Easycabs to Mumbai, Hyderabad and Chennai by end-2007, followed by Tier-II cities like Pune and Jaipur. His target is a fleet strength of 12,500 in another 15-18 months.

The business opportunity. If you don't have big bucks for the initial investment, start small by buying just a few vehicles. "(For such investors) the franchise route would be the most advisable, since it takes care of technology implementation, infrastructure and marketing," says Vij, who also provided a model business approach for the small entrepreneur.

If you have around Rs 5 crore (Rs 50 million) to invest, though, you can consider setting up your own radio taxi company. The base cost of 50 vehicles would come to Rs 2.5 crore (Rs 25 million), while technology inputs for a single city would add up to Rs 1.5 crore (Rs 15 million). Marketing and implementation costs would take care of the rest. While big money potentially opens up the big cities, for a smaller investor, Jaipur, Chandigarh, Kanpur and the like offer more scope, suggests Vij.

As far as franchising is concerned, the current players also offer avenues for budding businessmen. Carzonrent, for instance, plans to induct franchisees after building its own volumes. Mega Corporation, too, wants to take on individual entrepreneurs, who will run their own vehicles under the Megacab brandname.

"We have requested the government (for permits) and will be happy to network," says Vinod Mishra, general manager (fleet operations), Megacab. "Such a model already exists in Singapore and Dubai."

Do you have it in you? So, are you ready for the radio cab business? Vij and Mishra suggest it will work for you if:

You are in the business of petrol pumps, garages or car rentals;

You understand and appreciate the opportunity; and

You are willing to accept that customer-service is the key to success.

The speed breakers. Apart from policy hurdles, the main challenge is the lack of awareness. "The government must promote radio taxis just as it does the Metro," says Mishra. Vij agrees that increased government involvement is necessary. "Radio cabs should be provided roadside hailing locations, and also spots at airports, railway stations and bus stands. It should also be ensured that only international-standard cabs are allowed into hotels," he says.

That said, the industry acknowledges the future still looks very bright. So, go ahead. Hit the road.

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