Solving oversupply
Under the Highway Act as amended, local governments are only allowed to issue new medallions based on increases in population and in the total surface area of roads in their jurisdictions. But because the market was already saturated, the authorities in various cities and counties have year after year recommended that no new company or co-op operating licenses be issued. The number of such permits has gradually fallen, from the peak of 110,000 in 1998 to the current level of under 90,000. But to prevent the rise of oligopolies and protect the right to work, a small number of individual medallions are still issued (generally a few hundred per year, though the number fluctuates).
As for the satellite dispatch and wireless radio companies whose brand names are familiar to everyone in Taiwan, these are all operated under company licenses. Anyone-other companies, co-ops, or individual drivers-can affiliate with the brand name and compete for dispatches and assignments.
Because of intense competition, the issue of territorial control has long been an insoluble one, and chaos prevails. Hou Sheng-tsung, an associate professor in the Graduate Institute of Management of Technology at Feng Chia University, points out that you can easily find long ranks of parked taxis (often in no-stopping zones!) waiting for business in front of KTVs, hotels, busy MRT stops, and other locations where steady streams of customers can be expected. Companies have long staked out territories, and if "outsiders" unaware of the situation happen to join the line, cabs from the "local landlord" company will box that cab in so it can't move, to warn the intruder off. It has gotten to the point where criminal gangs have spotted a business opportunity in this situation, and extort protection money to hold down desired spots for one firm or another.
Wasted time, wasted resources
The failure to manage the number of taxis on the road not only means it is hard for drivers to make money, it is also a huge waste of resources. Hou Sheng-tsung has calculated that the time that a cab spends empty rose from 35% in 1995 to 80% in 2008. This means that the taxis of Taiwan are essentially driving around without passengers for 6 million kilometers per day, using up 815,000 liters of gasoline. In real terms, over the last 10 years the cost of fuel wasted in this way adds up to over NT$50 billion!
Although the latest statistics from the MOTC show that the overall vacancy rate has fallen to 65%, scholars like Hou still reckon that this will have to come down as low as 35% to ensure that all cabbies can make a decent living. To achieve that figure, the number of taxis working the streets of Taipei should be no more than 30-35,000, which is only about 60% of the current level.
Seeing the difficulty that drivers are in, the MOTC has come up with one relief measure after another. For example, in 2008, when the financial crisis dragged down demand and the price of gasoline rose sharply, the MOTC gave drivers a subsidy of NT$3 per liter of fuel. Beginning last September the MOTC also began a demonstration project encouraging civil servants to take taxis rather than government vehicles when going out on official business. The idea is that cars and drivers currently working for the civil service will be phased out of service. Since the average cost of a government vehicle and driver is NT$1000-2000 per trip, it's clear that the government can save a lot of money while helping to reduce the taxi vacancy rate.
Also, the MOTC is currently looking into making rules that would allow taxis to serve almost like miniature buses, picking up and dropping off multiple passengers, as well as promoting defined taxi pick-up points. Also, starting in June, new rules will go into effect forbidding companies from making drivers absorb discounts, in order to deal with the situation that angers so many drivers: "Companies give discounts, drivers take the hit."
The taxi business is heavily dependent on the overall health of the economy. During hard times, demand falls while many unemployed people join the ranks of taxi drivers, increasing supply. The opposite happens when the economy rebounds.
Operating Efficiency of Taxis in the Taipei Metropolitan Area