Thursday 1 September 2011

Medallion economics

Sam Morgan tweets (1, 2):
Sydney Taxi Economics: 2 drivers, 24hrs a day. Owner of $170,000 taxi license rents car for $1550 per week. Revenue ~$3500 per week. $1000 income per driver per week.
$1000/((24*7)/2) = 84 hours. $11.90 per hour. License owner yields $80,600 p.a. on $170,000 licence.
I'm not sure from where Sam sourced his figures, but if they're right, that's a very good annual return on investment. Sufficiently high that I wonder why more folks don't invest in medallions.

Let's work some of that back though. Suppose a car costs $60k and fully depreciates after three years if driven 24/7. So deduct $20k per annum from the revenue stream. Maybe another $7.5k in maintenance, vehicle registration fees, and car insurance [all of these are just guesses]. But even that still keeps us north of $50k p.a. on $170k licence. Add in a bit in management costs for the license-holder: ensuring the drivers aren't beating up the vehicle too much, replacing drivers if one leaves and so on. Is the rest regulatory uncertainty or have I missed some costs facing license-holders? Or, to put it another way, should I be trying to buy taxi licenses?

7 comments:

  1. Petrol would be paid by the drivers I'd have thought.

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  2. Why would petrol be paid by the drivers, but not car maintenance?

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  3. Why are home repairs paid for by the landlord but electricity by the renter? Just my guess about how things run. Same if you rent a car - you pay the petrol, the rental agency pays the oil changes.

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  4. Hi Eric,

    It seems that the cost of the licence is severely underestimated. According to these folks, a Sydney licence costs closer to 430K and the return on investment is around ~7.3%.

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  5. I question 24x7 availability of cabs in Sydney.

    They have this magical thing called 'changeover' at roughly 2am-3am and 2pm-3pm, where all the cabs seem to disappear at once. Perfect timing for those trying getting home after a late night, or trying to get to a meeting or the airport mid-afternoon.

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  6. Agreed V, it is an absolute bloody shambles.

    Taxi drivers I have spoken to give me the impression they were more like employees.

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