Concerns have been raised that the Korean taxi industry will fall behind in the era of autonomous taxis. This is due to the regulatory environment, which makes it difficult for new technologies like autonomous taxis to enter a traditional structure where licensed taxi drivers provide services through cruising operations. There are analyses indicating that structural reforms, such as the total licensing system for taxis and compensation for personal taxi licenses, are urgently needed.
On the 2nd, the Bank of Korea announced this through a report titled "Crisis and innovation measures for Korean taxi services in the era of autonomous driving."
According to the report, the global autonomous taxi market is expected to grow at an average annual rate of 51.4%, from about $3 billion in 2024 to $190 billion by 2034.
In particular, recent rapid advancements in autonomous driving technology, primarily in the United States and China, are fully commercializing autonomous taxis. Global corporations have invested more than 14 trillion won in the development of autonomous taxis and have already accumulated over 100 million kilometers of real driving data, leading the technology competition. This is more than a tenfold difference compared to Korea.
Autonomous taxis can reduce fares to half that of regular taxis due to the absence of labor cost burdens, and they can flexibly supply rides during late night or at specific times, significantly increasing consumer welfare. The Bank of Korea estimates that if 7,000 autonomous taxis (10% of existing taxis) are introduced in Seoul, consumers could gain an additional welfare of around 160 billion won annually.
However, Korea is lagging in autonomous driving software and data infrastructure and is also tied to a traditional taxi-centric structure institutionally. The Passenger Transport Service Act has been revised to protect the job stability of traditional transport operators, thus blocking the entry of new industries such as Uber, carpool services, and Tada.
As a result, licensed traditional taxis occupy 94% of the Seoul taxi market. In markets like New York City, London, and Singapore, ride-sharing services like Uber account for over 85% of the market, while traditional taxis make up only 12-14%.
The Bank of Korea noted, "There is much criticism that Korea's protection policy has negatively impacted the competitiveness of taxi services," adding that "ride-sharing, which allows young drivers to start businesses easily without the costly and complex procedures of license acquisition (ranging from 50 million to over 200 million won), is blocked, and the aging of taxi drivers has further reduced the overall size of the taxi market."
However, the Bank of Korea's outlook is that it will be difficult to continue blocking the entry of autonomous taxis in Korea. The need to secure national competitiveness, consumer demands, and potential trade conflicts arising from a ban on technology introduction will eventually lead to a situation where the introduction of autonomous taxis must take place.
The Bank of Korea warned that if autonomous taxis are introduced without adequate preparations, it could lead to a sharp decline in license prices and bankruptcies among taxi drivers, resulting in significant social expenses. A representative example is New York City, where the introduction of Uber caused license prices to drop by 92%, leading to a surge in bankruptcies among individual taxi drivers, prompting a belated launch of a debt relief program worth about 1.2 trillion won.
The Bank of Korea proposed three structural reform measures. First, it advised that the total licensing system for taxis be relaxed to enable the entry of autonomous taxis and that a separate licensing system for autonomous driving be established.
It also recommended establishing a social fund to purchase and retire personal taxi licenses at fair prices and introducing profit-sharing mechanisms that would allow personal taxi operators to acquire shares in autonomous taxi corporations at low prices. A notable case is Australia, which purchased 99.7% of taxi licenses at 39% of market price to mitigate the shock from Uber's introduction.
Finally, the Bank of Korea analyzed that it would be effective to pilot regulatory reform in small and medium-sized cities before expanding nationwide.
An official from the Bank of Korea stated, "The introduction of autonomous taxis is an inevitable trend for securing national competitiveness and enhancing consumer welfare," adding that "it is desirable to foster domestic corporations as soon as possible to introduce autonomous taxis with domestic technology, considering issues such as sovereignty over technology and driving data, as well as domestic policy linkage."