Taxi license prices are stabilizing in Paris: is the market mature?

Context of the study

In June 2016, 6t built a database featuring all the taxi license transactions registered by the Taxi Office of the Paris Police.

This database, covering 20 years and 13’000 transactions, was the first to offer a long-term vision of license price variations. The file provides information on the month of the transaction, the price, and on the status of both the seller and the buyer (society or self-employed)

6t has updated this database on a regular basis: the latest version, discussed in the present article, features data up to August 2017.

Taxi licenses and their market

Taxi drivers can work with different legal status:

  • Self-employed drivers: 58 % of taxi drivers in Paris[1] ; they own of a license;
  • Lease holders: 28 % of taxi drivers in Paris; they lease their licenses from a taxi company;
  • Cooperative taxi: 7 % of taxi drivers in Paris; they own shares in a cooperative to which they belong, and the cooperative owns the licenses;
  • Employees: 6 % of taxi drivers in Paris; they do not own a license.

To become a self-employed taxi driver, it is necessary to own a license. There are two different ways of obtaining a license:

  1. for free, registering on a waiting list at the Taxi Office ; it takes an average of 14 years to get a license through that channel.
  2. Buying a license from another driver who decided to retire, at a free market price. Licenses delivered for free since 2014 cannot be sold on that secondary market.

According to the survey of 1 000 Parisian taxi drivers conducted by 6t in 2016, 49 % of self-employed drivers had bought a license from another driver and were reimbursing it at the time of the survey, 36 % had bought a license and reimbursed it entirely, and 15 % had obtained their license for free. Among the drivers who did not own a license, 50 % declared they did not have the financial means to buy one, and 30 % judged the license to be an uncertain investment.

Self-employment appears to be a second stage in a taxi driver’s professional life; most drivers start by leasing a license, or as employees in a taxi company. According to the 6t survey, self-employed drivers had worked an average of 6 years as a taxi driver before getting their license.

This average figure conceals two different strategies: drivers who bought their license (85 % of self-employed drivers) did so after 2.6 years in the taxi industry. Those who waited for a free license (15 % of self-employed drivers) worked for 14.3 years before getting it. The rationale behind this second strategy was to accept a low income for a long period of time, as an employee or leasing a license, in order to obtain a valuable asset they could sell when they retire. As free licenses granted after 2014 cannot be sold on the secondary market, this strategy may become less attractive, causing the leasing price to drop.

In the same study, 6t demonstrated that the license cost was a heavy economic burden for taxi drivers to bear, and drivers who were leasing or reimbursing their licenses struggled to earn more than the minimum wage.

Evolution of the taxi license price since 1995

The two following graphs displays all license transactions registered by the Paris Police between 1995 and August 2017. The first graph features nominal prices, whereas the second one displays the price adjusted for inflation; the euro has been kept constant at its August 2017 level. Transactions are represented by month and price; the size of the circles is proportionate to the number of transactions realized.

 

In 18 years, the license nominal price increased by 275 %, from an average of 86’000 € in 1995 to 234,000 € in 2013. Adjusted for inflation, the increase is 172 % on that period.

Looking at the second graph, one can identify different periods:

  • An increase between 1995 and 2001, when the license price reached 150’000 €;
  • A stabilization phase between 2001 and 2005, with price just above 150’000 €;
  • A sharp increase in 2006, with an increase of 30 % of the price, which exceeded 200’000 €
  • A price drop in 2008, (year of a national report about economic growth, which stated that the number of taxi licenses should be raised, and year the economic crisis started), putting the price back to a level of 150,000 €;
  • An increase phase between 2009 and 2013, when the price almost reached 250’000 €;
  • A small drop in 2014, year of the Thévenoud report, which expressed the government’s will to change taxi regulations, but also the year transportation application such as Uber were launched on the French market. This drop was in part recovered in the beginning of 2015;
  • A significant drop in the license price in 2015 and 2016, with a price of 120,000 € at the end of 2016;
  • A small rebound in 2017, with prices stabilizing around 140’000 € in the summer of 2017 (the last three-monthly averages were 139,000 € in June, 142’000 € in July, and 141’000 € in August).

The following graph shows the same information in a different way: for each quarter, the number of sales is represented by a histogram (left scale), and the average price is represented by a yellow curve (right scale).

One can see on the graph that, as prices were dropping in 2015-2016, the number of sales was also declining, a sign that license sellers were waiting to see how the market would evolve. When prices stabilized in the first quarter of 2017, the number of sales rebounded, with 172 sells on the period.

A stabilization sign of a mature market?

The license price drop in 2015 and 2016, and its small rebound in 2017 can be interpreted as follows:

  • Competition coming from new mobility apps had an effect on license prices, which were rising sharply before these new services entered the market (+42 % between 2009 and 2013, taking into account the inflation). The price drop, from 240’000 € to 124’000 € at the end of 2016, is a sign that the economic rent associated with taxi licenses has become less important. This episode can be seen as a speculative bubble burst.
  • After the 2017 rebound, taxi licenses are priced at a level close to that reached at the beginning of the 2000’s, proving that the taxi industry still has a certain appeal and that drivers are anticipating their income to be significant enough for them to reimburse their expenses.
  • The impact of the new free licenses, which cannot be sold, appears limited on the second-hand license market: the number of new licenses issued is not sufficient to satisfy the demand from new drivers.
  • Price stabilization might indicate that the private transportation market has reached maturity:
    • The main taxi company “G7” decided to absorb its subsidiary “Taxis Bleus”. Having two brands was a way not to appear as a monopoly on the reservation market. With the new competition from Uber, it no longer appears necessary to follow that strategy.
    • New regulations on online platforms, with the alignment of the exam for drivers working for ridehailing apps on the exam for taxi drivers, lead to a convergence in status between taxi drivers and private hire drivers. While this regulation is by no means as stringent as that resulting from the limited and very much static number of taxi licenses available, it will, to a certain extent, ensure stability in the number of drivers on the market for private transportation.

The full database on license sales between 1995 and August 2017 is available in open data 


[1] “Proposition de réforme de la profession de taxi” (Proposal to reform the taxi industry) report, P. Chassigneux, 2008

Photo credit : Ansgar Eilting

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