In a significant shake-up for the ride-hailing sector, the Land Transport Authority (LTA) has introduced a controversial rule mandating that business-owned private hire cars maintain their operational use for a minimum of three years. Analysts are forecasting that this move is aimed at "leveling the playing field" between private hire cars and taxis, which have long been plagued by stringent regulations.

In a recent interview with Singapore Business Review, Walter Edgar Theseira, an associate professor at the Singapore University of Social Sciences, highlighted the stark historical contrasts between the two sectors. Taxis were previously bound to a sole purpose — taxi services — making them a riskier venture for operators. In contrast, private hire cars used for services like Grab or rentals could be easily reallocated for different uses, creating an uneven market dynamic.

This situation has been a key factor in the drastic decline of taxi numbers from nearly 29,000 in 2014 to just over 13,100 by 2024. Meanwhile, the number of chauffeured private hire cars has skyrocketed 38-fold, reaching 59,371, as per LTA data. Additional LTA statistics reveal a marked decrease in on-street taxi hailing, a trend that mirrors the shrinking number of cabs in circulation.

The new lock-in regulation took effect on February 19, ensuring that any business-owned private hire vehicle must adhere to its intended purpose for three years. Should these vehicles change ownership, the mandatory lock-in period remains in place. Importantly, this rule does not extend to individuals using their cars for ride-hailing or personal transport.

The ripple effects of this legislation are expected to be substantial. Apart from drawing a clearer delineation between taxi and ride-hailing markets, the lock-in rule is likely to mitigate speculative trading in private hire vehicles.

Assistant Professor Lee Kwok Hao from the National University of Singapore Business School expressed concerns over previous practices where private hire cars were prematurely converted to regular passenger vehicles or sold off early for profit. Such activities have intensified competition, disrupting the equilibrium between the two transport modes.

Transport Minister Chee Hong Tat disclosed that rental companies accounted for roughly 10% of all private hire car permits issued from January to October 2024. The newly enforced lock-in period may deter these companies from pursuing new private hire car permits, as they will need to gauge demand much more meticulously before bidding for certificates of entitlement.

In conclusion, as Singapore continues to adapt to the evolving landscape of urban transport, this three-year lock-in rule could not only bring much-needed stability and fairness to the local taxi industry but also reshape the way private hire services operate moving forward.

Will this new regulation indeed result in a resurgence of the taxi sector, or will it simply accelerate the pace of change in Singapore's ride-hailing ecosystem? Time will tell.

Stay tuned as Grab Singapore looks to innovate with self-driving cars to serve less popular locations, further intertwining the future of urban mobility in this vibrant city-state!