Hundreds of thousands of people around the world use taxi services all the time, and Ukrainians are no exception. More than 14 million passengers in the country travel by taxi.
Each year, more than 200,000 drivers make around 280 million trips. It is widely believed that taxi fares in Ukraine are much lower than in other countries. The Segodnya website decided to find out whether taxis in Ukraine really are that cheap and what shapes their prices.
Taxi fares in Ukraine remain fairly low
According to the Better Regulation Delivery Office (BRDO), the Ukrainian taxi market is worth 40 billion hryvnias a year. At the same time, according to various estimates, 94% of this market operates in the shadows, and accordingly no taxes reach the budget.
The cost of taxi services in Ukraine remains among the lowest. Experts at the Momondo portal recently compiled a ranking of the cheapest and most expensive taxi rides from the airport to the city center. They analyzed 140 world capitals, based on the prices listed on the airports' official websites.
The experts noted that the average distance from the airport to the city is 21 kilometers, and the average fare is about 25 euros. Kyiv ranks 84th in the overall ranking, sharing the spot with Morocco's capital, Rabat. The experts calculated that getting from Boryspil Airport to the center of the capital costs 16 euros (about 441 hryvnias). By comparison, in Tokyo the same trip costs 200 euros (although the distance from the airport to the city center there is more than 70 km, while in Kyiv it does not exceed 30 km), in Oslo and Reykjavik 100 euros, and in Nice, London and Washington 90 euros.
"The top five countries with the most expensive taxi services are Japan, Norway, Iceland, Monaco and the United Kingdom, while the five with the cheapest are Tajikistan, Uzbekistan, Tunisia, Gambia and Guinea-Bissau," notes Pavlo Yavorsky, an analyst at the Kyiv School of Economics.
Oleksandr Dyachenko, spokesperson for the NGO Association of Responsible Carriers, adds that taxi fares in Ukraine are relatively low — 3–4 dollars for an average trip, compared with 10–15 dollars in Western European countries.
"This is due to the low purchasing power of the population, strong competition in this market and the absence of state interference. The taxi market is open both to large companies and to very small services operating in the provinces, as well as to specialized taxis in big cities. In big cities, small services that target the mass market and do not have enough cars to cover the whole city join forces to exchange orders. As a result, there is a constant battle for passengers, and price is the number one factor in choosing one service over another," Dyachenko explains.
According to him, the growing adoption of mobile apps is also fueling strong competition in the taxi business. Thanks to several apps, passengers can instantly compare the prices (and other trip conditions) of several services at once and choose the most suitable one.
The state hardly controls the taxi market
As already mentioned, the taxi market in the country is practically unregulated by the state and exists on its own.
"A positive factor affecting price is that the state practically does not interfere in the taxi business. In fact, only 2–3% of taxi drivers (mainly in the premium segment) have the necessary permits and pay taxes," says Dyachenko.
If the state takes control of the market, taxi fares will soar several times over. This view was also expressed by Yuriy Syvytsky, a member of the board of the Intecracy Group consortium.
"Since there is practically no state control over the taxi market in Ukraine, prices are determined solely by supply and demand. Because practically all taxis and their customers use online services today, we have both huge demand and substantial supply. If the state starts controlling the taxi market, prices will roughly triple, and demand will fall accordingly," Syvytsky noted.
Taxi drivers say fares should be higher
Speaking more globally, prices depend on a country's level of economic development and on the industry's economic freedom.
"In general, labor costs are higher in more developed countries than in poor ones, and this drives up the cost of taxi services. Another important factor is how regulated the market is. Taxi services are often subject to licensing and must meet quality and safety requirements for passenger transport (including passenger insurance). Moreover, in some countries a limited number of licenses is issued to protect the environment, and they are allocated through auctions. Such measures also raise the cost of transport," says Yavorsky.
He adds that in Ukraine practically any driver can provide taxi services, even without a license. Accordingly, this market structure makes it possible to offer services at lower prices.
Taxi drivers themselves believe that fares in the country are underpriced by at least half, but say these conditions are dictated by the market.
"Artificially lowering prices inevitably undermines quality, because a driver who earns less or spends less on car maintenance cannot provide a proper level of service. Artificially raising prices is also harmful, because it will reduce the number of taxi customers. Shrinking the taxi market is undesirable given its socio-economic function in the country. According to the association's estimates, around 100,000 citizens use taxi driving as temporary work or a source of extra income. An artificial price increase and, as a result, a shrinking market would deprive these citizens of a way to earn their daily bread in the event of unemployment or temporary financial difficulties," Dyachenko comments.
The expert also notes that in particular cases the price depends on whether there is a natural or artificial monopoly. For example, a very small district center is of no interest to large taxi services, and there is usually only one service there, or simply a group of drivers who come to an agreement among themselves. In that case, the fare is determined solely by local residents' purchasing power and the drivers' will.
"An artificial monopoly is exactly the case with the airport. The main places where potential passengers gather (train stations, airports) most often become sites of abuse by local officials or, quite simply, by criminals. Drivers stationed in such places charge unjustifiably inflated prices and pay kickbacks, while outside taxi drivers are simply not let in, including by means of physical violence. The same apps partly solve this problem: you can choose and call a taxi in advance, bypassing the shady characters jangling their keys in airport lobbies," Dyachenko notes.