Top taxi operators are set to be less aggressive in expanding their businesses this year, discouraged by a generally weak economy, fuel price volatility and high inflation, which could derail the public'€™s purchasing power.

Publicly listed Blue Bird Group slashed its capital expenditure (capex) to Rp 2 trillion this year from Rp 2.36 trillion last year, as it planned to buy fewer additional vehicles, according to director Adrianto Djokosoetono.

Blue Bird, the no. 1 player in the country'€™s taxi market with a 43.6 percent market share, has been permitted by the government to increase its fleet by up to 6,000 this year, but says it will not use all of the permits.

'€œWe won'€™t even buy as many as last year,'€ Adrianto said on Thursday after the company'€™s shareholders meeting in Jakarta, though he declined to reveal the number of vehicles to be bought this year. In 2014, Blue Bird, which had a fleet of 32,500 as of last year, purchased around 3,883 new vehicles worth around Rp 1.3 trillion.

The company is to use more than half of this year'€™s total capex to purchase new vehicles and 15 percent to buy land for new taxi pools, while the rest will go on supporting infrastructure and maintenance.

Blue Bird'€™s net profit increased by 4.5 percent to Rp 739 billion last year, its profit margin squeezed despite a 21.4 percent increase in net revenue to Rp 4.7 trillion in 2014, 81.5 percent of which was contributed by regular taxis.

Blue Bird director Sigit P. Djokosoetono said the company would keep expanding its fleet to support revenue growth, but with volatile fuel prices, a weak economy and slow infrastructure progress, it was not expecting a major increase.

'€œFuel prices really affect demand [for taxis], particularly in big cities like Jakarta with heavy traffic,'€
Sigit said.

The government has introduced a new pricing mechanism for Premium-branded gasoline, which is usually used by taxis. It no longer subsidizes the fuel, but instead determines the price monthly based on market prices. As global oil prices have been on the uptick recently, Premium prices have been on the rise, creating an unpredictable financial burden for taxi operators.

Express Taxi operator Express Transindo Utama, which decided not to purchase any new vehicles this year, also expected its net profit to remain stagnant this year, president director David Santoso said.

'€œWe will continue to see pressure on net profits as a result of economic slowdown, including oil price fluctuation and inflation, while the taxi fares remain at Rp 7,500,'€ David said.

Indonesia'€™s economy grew 4.7 percent in the first quarter of this year, the slowest in six years, while the consumer price index (CPI) spiked to 7.15 percent in May, exceeding the government and central bank limit of 5 percent for the full year.

Express Taxi, which currently operates about 11,000 regular taxis, is striving to overtake Blue Bird, whose regular taxis reach more than 26,000 units, as the top taxi operator in Greater Jakarta.

'€œWe are still the second player, but we aim to be the top player in Greater Jakarta within three years,'€ David said.

Express Taxi, which now holds an around 30 percent market share, saw its net profits slump 30 percent last year to Rp 20.4 billion from Rp 29.3 billion in 2013, despite a 36 percent increase in revenues to Rp 248 billion.

The firm, which purchased more than 2,000 cars per year between 2010 and 2014, is now to focus on improving its internal technology infrastructure to better serve its customers, having allocated Rp 400 billion capex this year sourced from bank loans and internal cash.

Both Express Taxi and Blue Bird target revenue growth of about 20 percent on the back of an expected increase in demand.

A survey conducted by Euromonitor International revealed that, based on consumers'€™ consumption value, the taxi services market in Indonesia was forecast to grow 15 to 17 percent next year on the back of the country'€™s gross domestic product (GDP) growth, urbanization, tourism growth and the industry'€™s current low penetration. (foy)

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