A model doomed to failure?

Un modèle voué à l’échec?

Photo: Jacques Nadeau Le Devoir
The company Teo Taxi has closed its doors on Tuesday morning and all the drivers have been dismissed.

With the end of the activities of Teo Taxi announced Tuesday, it is the “revolution” of the taxi industry traditional promised by Alexandre Taillefer, which shatters. The ambitious business model unveiled with great fanfare three years ago was it doomed to failure ?

November 18, 2015, the former” Dragon “Alexandre Taillefer packed Queen Elizabeth to present Teo Taxi, which he describes as a” revolution in economic and ecological that will change the face of the taxi industry in Montreal.” On paper, everything works. But this was before the electric vehicles, the green and white begin to roam the streets of Montreal.

Apart from the use of electric vehicles, the audacity of Teo Taxi was including the hiring of employees to a full-fledged paid at least $ 15 per hour, rather than relying on self-employed workers, as in the taxi industry traditional.

On Tuesday, in a presentation of an amazing franchise, the leaders of Teo Taxi have admitted that this innovative model has shown its limits. As employees, the drivers of Teo were paid even when their vehicle was empty, which caused significant costs. Time management has also represented to be a headache, notes the company, since several drivers have chosen to abandon Teo at certain times to work in a traditional taxi or Uber.

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“The company was struggling to fill certain shifts in the periods of high demand [Thursdays, Fridays, and Saturdays], as many drivers preferred to rather work on their behalf “, says the document produced by Teo Taxi.

“The closure of Teo has nothing to do with the presence of a trade union, wishes to emphasize the spokesperson for the Teamsters union, which represents the drivers licensed, Stéphane Lacroix. Therefore, it is hoped that this model of employed drivers will be exported to the left and to the right in the transportation industry. “

Not as efficient as expected

The fall of Teo Taxi is also explained by high operating costs and significant operational constraints. The company recognizes that revenues have been insufficient to cover wages, electricity, maintenance, recruiting drivers, and spending in infrastructure and technology.

Specifically, the purchase of 192 electric cars, the use of 455 drivers and the installation of 138 charging stations have required massive investment that the efficiency gains were not able to fully compensate.

“The promise of Teo, it was to say that, with the data accumulated on the client and the model to optimize the use of vehicles, […], we would generate efficiency gains that would offset the initial higher cost, says professor at the Department of entrepreneurship and innovation, HEC Montreal Jean-François Ouellet. In fact, it was virtually impossible to predict when the company might achieve profitability. “

The company was struggling to fill certain shifts in the periods of high demand,
since many of the drivers preferred to work on their own

— Teo Taxi

The management of the fleet of electric vehicles has also been a problem : most of the cars had a limited range, which has compelled the company to recharge during the work shift drivers. “A major source of inefficiency,” notes Teo Taxi. Cars Tesla offered more autonomy, but the repairs are expensive and complex have made it so that vehicles are left locked in “for many weeks” after a road accident.

Modulate the rates

“In my opinion, the model of Teo, from the beginning, was not good for the taxi industry. This system was a problem from the start, and now we can see that it does not work, said Tuesday the spokesman of the Taxis in the Greater Montreal, Michel Aboujaoudé. If all the money invested in Teo had been given to the interim taxi to modernise the industry, I think that would have given better results. “

Teo Taxi and the taxi industry traditional agree however on one thing : the need to reform the laws and regulations to compete with Uber, in particular as regards the flexibility of the rates. Unlike Uber, which can make fluctuate the rates according to the traffic, those of the taxi industry are determined by the taximeter.

“The fact of not being able to change the price based on supply and demand, economically, it is shoot yourself in the foot. As long as Teo and the taxi industry in general will remain prisoners of it, the service will not improve and Uber is going to keep you a step ahead “, stresses professor Ouellet.

A new regulation should allow the industry to determine the price of a taxi with other technology, but it is made to wait for two years. “The minister […] is aware of the challenges faced by the transport industry paid people and intends to continue its modernization, in particular with the regulation” responds Sarah Bigras, press attaché to the minister of Transport, François Bonnardel. No timeline, however, is arrested, she said.

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