Taxify's London launch halted after transport regulator mounts investigation

Mike Butcher
It’s a ride-hailing company that is offering lower prices and taking a lower cut on each ride.

So much for a smooth launch. Ride-hailing startup Taxifylaunched this week in London to a big PR-push and fanfare. Most of the coverage was about how this plucky startup was going to take on the Uber giant. But Taxify has now had to pause its operations in London after a transport union questioned if it had a license to operate, and official body Transport for London announced it would investigate Taxify’s operations. Meanwhile, the startup has been tweeting drivers that download and use its app not to say they are 'employed by Taxify'.

So what is going on?

A few months ago Taxify applied for a license to operate a taxi service in London. This is important, because there is a big misunderstanding going on here about what Taxify is: it’s actually fleet management software in the cloud. Cab firms sign up for it, and use it to replace their tired old booking software, while Taxify takes a low fee. In other words, Taxify doesn’t want to run cab or private car firms. It's basically a tech front for licensed cab firms that could never build and manage such complex software themselves. But to launch in London, it needed a way in.

Well-placed sources say Taxify reached out to TfL in April about launch, but TfL were “walling” the firm, say the sources. Faced with a slow-moving bureaucracy, Taxify went ahead and literally bought a local cab firm City Drive Services. This has a licence to operate with TfL, trading under two brand names, Avanti Car Service CityDrive and Sigma Car Service.

For Taxify is not just a plucky little startup taking on Uber — it's now backed by Chinese ride-hailing tech giant Didi Chuxing in China.

Somehow, Taxify thought that just by buying a cab firm with a license, installing its cloud services and apps with the drivers, it could would then have carte blanche to launch its service in London.

Er, no. Taxi regulation doesn’t work like that.

The powerful GMB Union wrote to TfL saying: "The decision to acquire an operator and not advise Transport for London (TfL) of a fundamental change to licensing conditions seems incompatible with the law." It questioned whether the firm is "fit and proper" to hold a licence with TfL, asking about driver safety, and saying there is "obfuscation" about how Taxify actually works and operates.

They may well have a point.

Taxify is clearly trying to shoe-horn its service into London, not by encouraging local players to sign up for its service, but by literally acquiring a local player and launching. It’s not clear yet whether it had actually outlined this to TfL.

But Founder and CEO Markus Villig says he has spoken to lawyers about the arrangement: “We have literally sent them (TfL) an email every 3 days, so they knew very well we were launching.”

A TfL spokesperson said: “Taxify is not a London licensed private hire operator. We are urgently investigating the nature and extent of its activities and will take action where appropriate.”

Taxify launched in Estonia in 2013 and now operates in 18 countries, mainly emerging markets like Eastern Europe and Africa. The startup claims to have over 2.5 million customers, and recently announced a strategic partnership with Didi Chuxing in China.

It has an “all-in-one solution for taxi companies”. Basically, a booking system with a consumer-facing app. Traditional taxi companies use Taxify’s web-based dispatcher and fleet management systems to manage their back-end and unite under Taxify’s consumer facing app to stay competitive against expanding networks like Hailo and Uber. That then lowers Taxify’s costs, allowing them to charge less. It then charges the cab firm a low monthly fee of about 12-15€ per driver per month.

Taxify’s other focus is its rapidly growing Local Partner programme, which allows entrepreneurs to set up their local Taxify business using a franchise model and become a city manager on a revenue share model.

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