Sunday, May 22, 2016

Counting all costs - monetary and non-monetary - of owning and driving one's own car, it seems that taxi services such as Ola or Meru Cabs aren't that costly after all


Consider the direct and indirect costs of purchasing, owning, maintaining/repairing and driving one's own car:
  1. Initial car cost - plus government registration fee, taxes, etc.
  2. Insurance [renew each year].
  3. Fuel.
  4. Replace tyres [every few years].
  5. Regular servicing of the car.
  6. Repair costs, when minor bruises/dents or major accidents take place. Also add the time spent on taking the car to the workshop and bringing it back, plus the lost work due to this downtime.
  7. Parking space needed at home plus parking fee to be paid wherever you go.
  8. Risk of car theft, or theft of parts such as tyres, music system, GPS device, etc.
  9. When you drive yourself, you're basically exhausting/using your own time and energy - this too is a major cost, although it's tough to quantify.
  10. Cleaning/washing, plus dry cleaning.
  11. Pollution certificate.
  12. Challans/fines on breaching traffic regulations.
Consider the fares published by Ola below.

When someone claims that the per km fares of cab/taxi services such as Meru Cabs, Ola Cabs, Uber, TaxiForSure, etc., are "high", they're usually only comparing the direct fuel cost [to that of their own car]. They do not include a bunch of other costs - some of which like the vehicle cost are themselves very, very substantial - but many of which are relatively small individually, but collectively become large enough to seriously start competing with fuel cost. That being said, let's be very clear that all of the expenses that one incurs on one's own car are also incurred by cab/taxi cars [plus remember the profit requirement of the company]. The saving comes from economies of scale, higher utilization of hardware and men, reduced wastage, route optimization, opportunistic pricing, etc.

Finally, these cab/taxi services also provide certain conveniences that aren't available in self-driving.
  1. Availability at any time of the night, and also at nearly any location. The fares can be higher, sure, but you can't always drive yourself at night.
  2. Further, the sheer confidence of availability [the assurance that it's always available, even if you don't use it] has quite a value.
  3. Services like Ola allow you to schedule a ride for a future time.
  4. When you're about to land at, say New Delhi, you can schedule a cab pickup and thus avoid waiting time at the airport. Not always possible with your own car.
  5. Ride history, ride tracking, etc., are things that are [currently] possible only with services like Uber, Ola, etc.
  6. Our own vehicles sometimes experience breakdowns, but the Ola fleet as a whole doesn't go down. Even if components of the fleet go down from time to time, for a customer a cab is always available.
Airlines grapple with these issues all the time - airlines have to take into account all sorts of costs, and not just fuel. This issue also has direct relation to the "rent vs. buy" question for a home ["Why build/buy a home at all when you can happily live all your life in a much superior rented home, while spending much less overall."].

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