Economics of a Taxi Ride to Kara

My Togolese clown car record thus far has been 13 people and a goat in a five-seat hatchback taxi. This is pretty impressive for a car so small and even more impressive to the driver when he collects his fares at the end of the ride, but is this feat actually good for the driver in the long run? More revenue equals more profit, right? And more passengers per taxi always mean more money for the drivers. This simple assumption, however, is not the case and is misunderstood throughout Togo. These taxi drivers think they are being more efficient by using less fuel per passenger, but they may be mistaken. Crammed, overfilled vehicles strip profit margins by overweighing already decrepit automobiles, delaying potential departures, and deterring the public from using stations or even using a ridiculous form of public transportation altogether. All of these costs are further exacerbated by the high social costs to the public from road collisions and damaged goods which are more likely when cars are pushed to the limits.

Filling the car to the limit is not economical because extra weight actually lowers the efficiency of the vehicle, i.e. gas mileage, and increases the frequency of accidents. Simply put, if the chassis and the engine were designed to accommodate eight passengers instead of five, the car would have eight seats. Optimal speed can be discussed as an analogy to this concept. Each vehicle has an optimal speed that allows for the most miles traveled per gallon of fuel. A standard five-seat sedan with a four cylinder engine usually travels best at about 55 mph, or around 3500 RPMs in the highest gear. Below this speed, the car is not reaching its full potential, while it surpasses this optimum above the target speed to actually be counterproductive. Most any driver is aware of this, but will push the vehicle anyway; usually to save time. This "greed" is also evident in Togolese taxi drivers as they add more and more weight to their cars in the form of yams, chickens, people, and so on. They surpass the target weight and lose fuel efficiency. Therefore the relationship of profit per passenger, or pound to be exact, actually represents diminishing marginal returns.

Secondly, drivers that cram their taxis with extra weight actually lower the demand for their own services. Over cramming vehicles makes waiting times unbearable and deters clients from going to stations. This problem is further compounded by the spawning of multiple departure locations per town because passengers consistently try to outsmart the system to find taxis that will depart in a timely fashion. These individuals bypass stations and jump onto taxis already en route to the destination, or at least in the right direction, because moving is preferable to sitting and waiting. A five-seat car with four passengers would fill quickly and drivers could serve multiple journeys each day, instead of the all too typical go-return trip daily for a taxi driver.

Furthermore, who wants to ride in a taxi when one will share half a seat with someone sweaty and irritable at the end of a long day? It is also a direct insult and simply rude to expect a client to sit in the trunk or on the roof. All of this is to the benefit of whom? It is surely not the passenger who pays the same fee, but for the greed of the taxi driver, albeit a misconceived greed…

The public response is apparent through the abundance of motorcycles in Togo. It is not difficult to notice all the Chinese and Indian motorbikes on a street in Lomé or a village on market day. The zemidjan, or taxi-motorcycle, has become a staple of Togo's inept automobile taxi network and a direct consequence of the taxi drivers' misconceived greed for more passengers. More Togolese seek their own motorcycle and use taxi-motorcycles to cry foul toward the taxi system. One hundred CFA across town hardly seems comparable to an automobile taxi, but passengers are using taxi-motorcycles increasingly often for longer distances.

A journey from Kabou to Bassar, for example, is 23 kilometers on a decent stretch of dirt road and costs 700 CFA in a typical taxi. That is, if a passenger can find one on a non-market day. Travelers are instead opting to pay 1200 to 1500 CFA and sometimes double price of an automobile taxi to reach the same destination. This proves that the Togolese will pay more money for convenience. As a result, being a taxi motorcycle driver is now the hot new job for young men and some women as they can earn up to 5000 CFA of profit daily. This lucrative enterprise has won the interest of middle school dropouts to university graduates, although now the Togolese market is showing signs of oversaturation and incomes are falling.

These overfilled taxis are also costing the Togolese public through healthcare expenditures and damaged goods from traffic accidents. This effect is difficult to measure because it is not a direct consequence to the driver, but the driver is a member of the community nonetheless. Healthcare costs, human capital loss through death, and physical damage to goods could be reduced if drivers exercised more prudence. Furthermore, the abundance of motorcycles on the roads escalates this social cost because motorcycle passengers involved in accidents are more likely to suffer from severe injuries.

So, are overfilled taxis better for the driver? Do the drivers actually see more profit when the car is occupied beyond its max?

Cost-Benefit Analysis of Two Opposing Taxi Driver Strategies

Let's analyze a typical taxi journey from Kabou to Kara. The fare for each passenger is 1200 CFA to travel 57 kilometers. The fuel necessary for a five-seat hatchback, in this case a 1980s Toyota Corolla 4WD, is about 8 liters (15.4 MPG). Given 600 CFA per liter currently in Togo, this represents an expense of 4200 CFA for fuel.

We can assume that the driver will wait until he has seven passengers for the journey. This is an average estimate because there are occasionally fees for baggage for which we will not account while also not all passengers make the full journey. This provides revenue of 8400 CFA.

Upon leaving town in each direction, the driver must pay the syndicate a fee of 200 CFA.

Along the journey, the driver must also pay a fee of 1000 CFA to a patrolling officer for having six passengers. He must also pay 100 CFA for a taxi-motorcycle to take the seventh passenger to a rally point after the controlling officer's field of view. This process costs 1100 CFA.

In summary, the revenue is estimated at 8400 CFA and the expenses amount to 5500 CFA, leaving a profit of 2900 CFA per journey. This profit, however, does not account for car loan payments, maintenance, insurance, or unexpected problems along the route. Since many five-seat taxis only make one go-return journey daily, that allows for 5800 CFA of profit before including vehicle costs.

Is this the most efficient strategy for a taxi driver?

Now we can analyze the alternative strategy of having one passenger per seat. This means four paying passengers. We can estimate revenue of 4800 CFA. Without breaking any laws, there is no need to account for fees along the route, but the driver must still pay 200 CFA to the syndicate upon leaving town in each direction. Keeping gas mileage constant at 4200 CFA, the profit per journey is now only 400 CFA and 800 CFA daily.

However, if all taxi drivers apply this strategy, they will make many more trips daily and increase their revenue. During a typical day, there are about 8 five-seat taxis between Kabou and Kara. Including both directions, this means 112 passengers. Now divided by four passengers per car, this now means 28 journeys instead of 16. Keeping the number of drivers constant, this allows for 3.5 trips daily instead of the typical 2. The 400 CFA profit times 3.5 trips with the new strategy allows for 1400 CFA of profit daily.

The result is 5800 CFA overfilled versus 1400 CFA with one passenger per seat of daily profit. So the overfilled taxi must be more efficient.

The analysis cannot stop here. The number of passengers necessary to make the new, legal strategy of four passengers per five-seat car equally profitable is 464.

5800 CFA / 400 CFA = 14.5 trips

14.5 trips x 8 taxis x 4 passengers = 464 passengers

Would a simple strategy increase the demand for five-seat taxis to Kara from Kabou enough to accommodate 352 more passengers? This is difficult to measure yet certainly doubtful even if certain qualitative variables would likely increase demand.

Demand would increase for several reasons. Wait time is now nearly cut in half so people would not be as deterred from traveling. Comfort has also increased making the journey more enjoyable per passenger. Some may even opt to ride in a taxi instead of using their private motorcycle. (57 kilometers using a standard 125cc motorcycle, such as a Haojin would consume about 1.75 liters or 1050 CFA worth of fuel per journey)

With the new strategy, the automobile would also travel 75% more distance daily holding the number of passengers constant. This would increase maintenance cost, although it may be at least partially offset by the decrease in repairs due to excess weight.

Social externalities of health care and damaged goods must also be regarded as a heavy cost on overfilled, unregulated taxis. Accidents are rampant on Togolese highways and having two people in the driver's seat, a rear bumper sagging to the ground, and a load twice the car's height on the roof obviously do not help prevent road collisions. The society definitely gains from the new strategy.

The best driver strategy is up for discussion, but it is clear that the current strategy is not convenient to passengers and it exerts a high cost on the economy in terms of social externalities. In conclusion, regulating drivers' desire to overfill their taxis would be better for the country as a whole, although there does not seem to be any motivation for a taxi driver to change strategy. The increase in demand necessary of 414 % for passengers to make the new strategy feasible is doubtful. Any change of strategy will, therefore, not come from the drivers' syndicate unless a substantial increase of fares occurs. That seems unlikely given the recent increases in the cost of living worldwide.

The drivers obviously have a direct incentive to continue overfilling their vehicles. In order to address this issue, a solution or an incentive must come from elsewhere.