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?


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

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

  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.

  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%.

  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.

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

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