Hong Kong’s busy streets are a constant flow of vehicles, reflecting the city’s fast-paced energy. A new challenge has emerged, however, not from traffic jams but from the clash between the traditional taxis and the new app-based ride-hailing services.

Taxi drivers see these apps as a threat, stealing their business and income. But the situation is more complex than a simple good versus evil story. It’s a balancing act between tradition and innovation. Hailing a red taxi is a familiar sight in Hong Kong — a simple wave and you’re on your way. Ride-hailing apps, on the other hand, offer impersonal efficiency — a tap on your phone books your ride.

While it might seem like an inevitable war between old and new, it’s a mistake to view it that way. Ride-hailing apps have certainly affected the taxi industry, but blaming them for all its problems is too simplistic. Long waits and difficulty hailing taxis are real passenger frustrations, but demonizing apps ignores their benefits. Real-time data matching reduces empty cabs cruising for fares, meaning shorter waits for everyone.

A major problem for the taxi industry is the current licensing system. With only a limited number of licenses available, controlled by a few players, most taxi drivers work on a rental model. To control traffic congestion, the government stopped issuing new licenses in 1986. Existing licenses are permanent, freely tradable, and exempt from stamp duty, making them prime targets for speculation. This has driven license prices to astronomical heights, though they have softened somewhat in recent years, settling at less than HK$4 million ($512,256). For some taxi owners, prioritizing returns trumps everything — vehicle condition becomes unimportant as long as the taxi keeps running and someone is willing to rent it. With taxi licenses becoming multimillion-dollar assets, there’s little incentive for change. While drivers bring in revenue each month, a large portion goes towards covering rental fees and fuel costs, leaving them with a considerably smaller income. This hefty chunk goes to a powerful interest group holding these “precious assets”, who naturally resist any reforms that could reduce license prices.

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The Hong Kong Special Administrative Region government has acknowledged the need for change. The Consumer Council expressed a positive view of ride-hailing platforms in 2017, acknowledging the potential for improved passenger experiences through technology. They recommended liberalizing private hire car permits to allow ride-hailing services. In 2019, the SAR government proposed a pilot program of 600 franchised taxis with time-limited operating rights and regulated service standards. This aimed to improve service quality and make drivers direct employees with better labor rights. However, the proposal faced strong opposition from the taxi industry, leading to its withdrawal in November 2020.

The future of Hong Kong’s taxi industry hinges on its ability to adapt. While ride-hailing apps offer undeniable convenience, taxis can carve out a niche by focusing on what apps lack — personalized service and a human connection

Despite the withdrawal, the need for change is acknowledged. The government could directly intervene by buying back licenses at a fair market value. While a significant financial investment, it would weaken the powerful taxi syndicates and allow for a more balanced regulatory environment.

The future of Hong Kong’s taxi industry hinges on its ability to adapt. While ride-hailing apps offer undeniable convenience, taxis can carve out a niche by focusing on what apps lack — personalized service and a human connection. Equipping drivers with customer service training and app literacy can bridge the gap between tradition and technology. Imagine taxi drivers who greet you by name, offer phone charging or local recommendations, or participate in a loyalty program rewarding repeat customers. These are experiences that simply cannot be replicated by an app.

Technology can also be harnessed to empower taxi drivers. Integrating electronic payment systems and in-car app integration can streamline the payment process and offer passengers the convenience they expect. Additionally, providing drivers with access to real-time traffic data can help them navigate congested areas and optimize routes, reducing wait times for both passengers and themselves.

Ultimately, finding common ground is crucial. The government can act as a facilitator, fostering communication and collaboration between the taxi industry and ride-hailing companies. A modernized regulatory framework that prioritizes safety, fair competition, and innovation can benefit all stakeholders. This could involve establishing clear guidelines for both taxi operations and ride-hailing services, ensuring a level playing field. Additionally, creating a platform where taxis can be hailed electronically through apps can bridge the convenience gap and attract a wider customer base.

By working together, Hong Kong’s iconic red taxis and the innovative ride-hailing apps can coexist and thrive. This will create a transportation system that offers residents and visitors the best of both worlds, keeping Hong Kong moving forward as a smart and progressive city.

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However, the path to this future requires more than just cooperation. A cultural shift is needed as well. Younger generations, accustomed to the ease of app-based services, may need to be convinced of the value proposition of taxis. This could involve highlighting the environmental benefits of using shared transportation compared to single-occupancy rides, or promoting the unique cultural experience a friendly taxi driver can offer — a local perspective you won’t find in an app.

The success of this transformation hinges on effective communication. The government can play a vital role by launching public awareness campaigns that showcase the revitalized taxi industry. Imagine catchy slogans or social media challenges celebrating the human touch and personalized experiences offered by taxis. Partnering with local businesses to offer exclusive discounts or rewards for taxi users can further incentivize ridership.

Ultimately, Hong Kong’s transportation landscape is at a crossroads. By embracing collaboration, innovation, and a touch of nostalgia, the city can create a future where tradition and technology coexist. This will not only ensure a smooth and convenient ride for residents and visitors, but also preserve a piece of Hong Kong’s iconic identity — the friendly wave and the reassuring red glow of a taxi waiting at the curb.

The author is chairman of the Asia MarTech Society and sits on the advisory boards of several professional organizations, including two universities.

The views do not necessarily reflect those of China Daily.