Manila and the Ridehailing Market

If you think your commute is bad...

I’m just back from 3 weeks in the Philippines, including time in Manila and a trip north to Ilocos and Cagayan. While in the Philippines I walked, used Manila’s MRT/LRT commuter lines (both elevated lines), rode tricycles and jeepneys, and hailed both regular taxis and (via their app) Grab taxis and cars. I did not use motorcycles, though for the brave you can hail a ride on one via Jump. Oh, and I rented a van and driver, and “borrowed” rides from my wife’s friends and hopped in the University of the Philippines College of Nursing’s van.

So one observation is the sheer variety of transport available. Descriptions follow.

The other is the potential market for robotaxis. Which is nil. That is an important takeaway for anyone swept up in the investment frenzy in firms promising this form of taxi services.

Briefly, and easy to see in a developing transportation market such as Manila’s, there are lots of alternative transportation modes. Those limit the market for taxis in general, and ride-hailing in particular. Competition keeps fares low. Taking a Grab is a luxury, as their newer vehicles cost 20% more than taxis, and in busy periods dynamic prices pushes costs to double or more. Even if in some future world robotaxis reach the point where they can handle Manila traffic, they would face a small market in both ride volume and revenue.

The bottom line is that robotaxis will be commercially viable in the dense urban areas of rich countries, but nowhere else. The market isn’t trivial – Uber after all earned $800 from its operations in 20204Q2, and that is only a slice of the global taxi market. However, Southeast Asian rival Grab is not profitable, and China rival Didi has only been intermittently profitable. Margins are thin, and there’s no reason to think that robotaxis will somehow avoid competition, or capture all of the market.

The Philippines

If the above looks like a chaotic mix of jeepneys (≈19 passengers), buses, vans (set to replace jeepneys), scooters, motorcycles, big trucks, small commercial vehicles, and passenger vehicles, well, it is, but it’s orderly compared to smaller streets that add tricycles to the mix. Furthermore, motorcycles and scooters (and the occasional intrepid bicyclist) weave in and out of traffic, and drive in between lanes. The above photo, of Commonwealth Avenue in front of the UP Diliman campus, may be the most orderly one in Metro Manila. Most roads in the older sections of Manila proper are only 4 lanes. One nearby intersection has busy three roads coming together, no traffic circle, no traffic lights, no traffic cops.

Transportation Modes

I don’t cover everything, as noted.

Tricycles

At 5’10” [177cm] I’m a bit tall for a tricycle, I can’t sit up straight, but they only cover short distances so I endure. In a very rural area – a village in a river delta without proper roads – I’ve ridden side-saddle behind the driver (who isn’t required to wear a helmet). I’ve also used them to get to the airport in Puerta Princessa, Palawan. In rural areas, groups of kids will pile in to get to school, it’s that or walk…

Fares have gone up, they can be as much as P35 per person or US 65¢, so a 10-minute ride for my wife and I can run a little over a dollar. In Manila, they aren’t allowed on major streets, and are only licensed within a locality. In the countryside, they are everywhere and go anywhere. It would be great if they could be electrified, as they are noisy and many aren’t well-maintained (eg, smoky exhaust). However, I have only heard about experiments in that direction in one island resort.

Now there is a social component that helped the proliferation of tricycles: remittances to relatives to buy a trike so they can generate income. Casual bbservation suggests trikes are now so pervasive that in rural areas they sit idle for long stretches of time, and so aren’t a good source of self-employment income. In larger towns (eg, in the outlying areas of Metro Manila) they seem to keep busier. But it seldom takes more than a minute to find a ride unless you’re on a side street – and even then it may not take long.

Jeepneys and Vans

At least in Manila, public policy aims to push jeepneys out of the market, as they are often noisy, smoke-spewing, and unfriendly to those who are not spry. Instead, they are being replaced air conditioned vans. Both run along fixed routes, and when traffic is busy (most of the time) they have more-or-less fixed stops. Fares are P15 with a few peso surcharge for distance. Things are generally on the honor system, with passengers handing their fare to the person in front of them to pass on to the driver, and passing change back in return. My wife, as a senior, gets a discount…

Finally, at one time there were also horse-drawn “kalesa” outside of major cities, but now they survive only in a few tourist areas. Oxcarts were used for heavy loads. For local transportation of people and goods, but tricycles have make both obsolete. Oxen remain in farm fields, but even those are being displaced by small tractors.

Buses

A wide variety of buses ply the roads, from fixed route buses in urban areas, and between nearby towns. Observationally they typically are used for longer distances in a place like Metro Manila, such as between key areas of the many cities that make up the greater Manila area. There are also a couple overhead train lines, which we frequently use, with fares of P10-P20. It’s cheaper and at least as important, far quicker, to take a jeepney or taxi to a station, then ride a few kilometers, and take another taxi or jeepney, than to take a taxi the whole way.

Then there are a wide array of long-distance and interregional buses, often with 2-3 companies competing on each route. There are even luxury buses that run long routes overnight, with bunk beds and movies. A luxury overnight bus, along a 500 km route, might cost P800 (US$15), a daytime bus with regular seats a third of that. Between islands there are ferries, including both passenger ferries and larger boats that will take cars and motorcycles.

Taxis and Grab (Ride-Hailing)

There are lots of taxis, a fair number of Grab Taxis (older vehicles, which may not have functioning air conditioning), and a smaller number of Grab 4- and 6-person cars. Grab uses dynamic pricing, but my experience with Grab has been mixed.

There is a set of dedicated Grab taxis at the Manila airport, that I estimate cost double what a regular taxi would run. To keep availability, the dedicated Grab cars are prohibited by Grab from picking up passengers elsewhere – they have to dead-haul back to the airport. Hence the premium. In our latest trip, the fare was P1,190 or a bit more than $20, for a 22.6km ride (14 miles) that took about 50 minutes. My return Grab was a shorter trip (14km = 9 miles), took just as long due to traffic, but only cost P500. Grab Taxis (yellow cabs that use the Grab app) are cheaper for the same route, closer to P400. A regular taxi is closer to P300. In general we find taxis cost 25% less (with a bigger differential at times of day when dynamic pricing pushes up Grab fares), and are easier to find. The initial fare starts at P40 or less than US$1. They may not, however, have working air conditioning. In the many times we have used taxis, only one took a circuitous route, but not by much. In contrast, some taxi drivers know side roads that are quicker than the Google Maps route.

In rural areas ride hailing is less common, or absent. The mix also shifts from cars – taxis – to tricycles. At a regional airport, with only a handful of flights per day, there may be vans waiting, and a standard per-person fare into town, but no taxis. The many small hotels can likewise arrange for a car or van to take you places, with a standard (or at least negotiated in advance) fare, but they are informal.

Motorcycle “taxis”

I’ve never been adventurous enough (and traveling by myself) to try Angkas, Joyride or MoveIt (a Grab affiliate), apps that allow you to hail a motorcycle, complete with a helmet for you as passenger. They are significantly cheaper than taxis, official fares suggest a 9km trip would run P120, and the transit time is quicker. I don’t know about response time, but observationally I see a lot of them on the road.

Delivery services

Of course, having things brought to you is an alternative for going yourself. Grab offers food delivery, but there are other services including restaurants that have their own motorcycles (or bicycles, for truly local deliveries). But stores will also deliver, and when we bought a painting from a gallery, it was delivered by LaLaMove, which used a car and let you track progress via their app. There are a dozen or so rival services, and others that operate locally outside of Manila.

Personal cars, that is, relying on friends and neighbors

I grew up in Detroit in the late 1960s / early 1970s, but I and most of my friends did not have our own cars. It was an aspiration, of course, but most families had only one car. So going somewhere in the evening took intrafamily negotiations (I had siblings) or arranging to ride with friends. The same practices are found in the Philippines. Some of the rural churches have a car or van (or the pastor has one), and they may be in fairly regular use. Ditto friends. One set of visits was by motorcycle (on an island with very few cars), and another set by tricycle (more common in rural areas, they’re cheaper to own and operate, and can go places where it’s hard to maneuver a car.

I’ve ridden a couple times in a van owned by the College of Nursing of the University of the Philippines, carrying around deans and faculty and me as an alumna spouse (mea culpa: said spouse helped raise money to buy the van, so the College wants to show off that it’s a nice van and that it’s in constant use).

Another way of viewing this is that informal car-sharing and ride-hailing are pervasive. Some money may change hands, but often they are embedded in networks of extended family and friends, so are part of the quid-pro-quos incumbent upon community membership. There’s still some of that in the area of rural Virginia where I live, as I have a pickup and so may, well, pick stuff up for people (or take a load of brush to the landfill). But even so it’s really tough for those who can no longer drive, and the population is aging. There are no taxis in Rockbridge County. Addressing rural transport needs, though, is another topic, and will involve discussing rats, or rather R.A.T.S.

Rentals

I’ve never rented a motorcycle, nor have I myself driven a car. However, those are certainly options, as are rental bicycles, particularly in tourist areas. I have however taken a trip by rental van, replete with driver, for a multiday trip into rural areas with many stops (and 5 of use as passengers). The cost was P4,000 (US$70) a day, including the driver. We paid for gas and tolls, so the cost was about US$100 a day, covering a distance of about 1,600kms (1,000 miles).

Walking

Now all of these formal and less formal means of transport are expensive. Walking is pervasive, and in rural areas people use bicycles. Steets used to be for walking. There may now be sidewalks in cities, but utility poles, store displays and so on push pedestrians into the street. Except on major urban roads, people, bicycles, scooters (no helmets) and small motorcycles (helmets required) are criss-crossing streets more or less at will. So while pedestrians (and kids at play) are being pushed off streets, that process has only just started. Oh, and farmers also use roads to dry grain, and to thresh it. Roads aren’t just for transport.

Airlines

The Philippines stretches for roughly 1,000 miles N-S, and some islands are quite remote. So basically, the only way to get to Batanes (the northernmost islands, close to Taiwan) is to fly from Manila to Basco. Ditto going to Davao in Mindanao, the southernmost of the major islands, or Puerto Princessa in Palawan, the westernmost island (400 miles from Manila). There are several regional airlines, with many flights per day for as little as $30-50 one-way. Sometimes ferries are an alternative, sometimes not. Of course, with hundreds of inhabited islands, many are only accessible by boat.

Conclusion

There are many means of transport that are close substitutes. Reflective of local wages, many are quite inexpensive even for Filipinos.

One key takeaway is the limits the market size for any single mode of transportation. Yes, taxis and ride hailing generate revenue – but so far not enough to make Grab, the dominant ride-hailing provider, consistently profitable.

In part through supplier visits and contacts and presentations at conferences, I have followed the development of “autonomous” driving technologies for 20 years, from the development of e-steering to the early DARPA challenges that gave birth to Waymo. The chaotic roads of the Philippines are not amenable to autonomous driving. However, much of the world is similar in the complexity of what happens on roads.

The technical challenge aside, there just isn’t much money to be made by robotaxis, because there isn’t much money to be make in ride-hailing. They would also be only a partial substitute – taxis are also used to transport goods, and drivers are essential to load and unload cars and assist the many passengers with disabilities.