Kakao Mobility's pilot regulatory exemption application to lift restrictions on operating large and premium taxis in the greater Seoul area has been approved by the government. However, the Ministry of Land, Infrastructure and Transport drastically cut the requested volume when granting approval, effectively opting for a "conditional approval." With the market already tilted, some are questioning whether it is appropriate to repeatedly apply the same exemption to a dominant platform, pointing to the limits of the pilot exemption system. The pilot exemption is part of the regulatory sandbox, which allows temporary easing of rules so new services blocked by existing regulations can be tested in the real market for a set period.
According to the government and the mobility industry on the 9th, the Ministry of Land, Infrastructure and Transport recently gave final approval to Kakao Mobility's "integrated operation across the greater area for large and premium taxis" pilot exemption. As a result, KakaoT's premium taxi services Venti and Black, as well as large vans, will be able to group all of the Seoul metropolitan area—Seoul, Gyeonggi and Incheon—into a single operating zone and freely dispatch and run. Full-scale operations are expected to begin after completing certain additional conditions.
For example, under the previous rules, a vehicle that traveled from Seoul to Yongin, Gyeonggi, could not accept a call bound for Incheon and had to return empty, but with the pilot exemption in place, continuous operations within the metropolitan area will be possible, which is expected to improve empty-ride rates and dispatch inefficiencies.
However, the ministry did not accept the number of vehicles Kakao Mobility originally sought to include in the pilot as is. Kakao Mobility requested a pilot of up to 8,000 vehicles, but the ministry cut that to about 1,000 for approval. The move is seen as considering parity with the operating scale of Tada (VCNC), a smaller platform that previously received approval for a pilot exemption with the same content.
An official at the Ministry of Land, Infrastructure and Transport said, "When similar or identical proposals come in, the regulatory sandbox framework, in principle, requires us to review them for approval," but added, "In a market of limited size, a large corporate platform requesting a massive volume runs counter to the intent of a pilot exemption." The official added, "We adjusted the scale in light of the fact that it could effectively become a business authorization rather than a pilot."
The response from small and midsize mobility platforms is cool. Latecomer platforms such as Tada say they spent years on business design and regulatory consultations to build a metropolitan integrated operation model, and that applying the same model to a firm with roughly 90% market share via a pilot exemption is closer to business expansion than innovation testing. They are particularly concerned that if the integrated metropolitan effect is proven in premium taxis, the same logic could spread to regular taxis.
An industry official in mobility noted, "Pilot exemptions are meant to verify the effects of regulatory easing, but the moment a company that already dominates the market participates, it stops being a data experiment and turns into market encroachment."
Kim Dong-young, a senior researcher at Korea Development Institute (KDI), said, "A pilot exemption is a mechanism to test systems or services whose effects have not yet been proven, within a limited scope, and the need for experiments to improve resource efficiency is clear," adding, "In particular, premium taxis face relatively fewer conflicts of interest than regular taxis, which is part of why they were chosen as a pilot target."
However, Kim said, "The problem is a structure in which, when similar or identical proposals come in, pilot exemptions are repeatedly applied without sufficient consideration of market structure or industry conditions," adding, "When moving from the pilot to institutionalization, there needs to be a more three-dimensional reflection of the already tilted market structure and competitive conditions."