As Uber circles, a Montreal entrepeneur bets on taxis

TheGlobeandMail.com
By Nicolas Van Praet
Aug. 09, 2016

Montreal has a new king of cabs.

Serial entrepreneur Alexandre Taillefer has struck a deal to buy Montreal’s Taxi Diamond company, giving him control over about 40 per cent of Montreal’s licensed cabs.

The agreement increases consolidation in an industry shaken up by ride-hailing companies, such as Uber Technologies Inc. It is a bet that he can reinvent paid passenger-car service at a time many consumers are fed up with traditional taxis.

“The public wants to see better service, and this is one avenue to provide it with more capital for phone apps” and other technology to compete against the Ubers of this world, said Jim Bell, executive director of operations for the Canadian Taxi Association. “I think you’re going to see more consolidation of taxi companies. It’s just a much more efficient and better way of providing service to the pub lic.”

Mr. Taillefer, already a seasoned entrepreneur at 44, is perhaps best known for selling tech startup Nurun to Quebecor Inc. and for his role in the Quebec version of the reality TV show Dragon’s Den.

More recently, Mr. Taillefer has steered into transportation, buying Montreal’s Hochelaga Taxi and launching Téo, a company that offers an all-electric taxi service driven by a salaried staff that uses hailing and payment technology similar to that of Uber. He has called the taxi industry “a total mess.”

With the purchase of Diamond, Montreal’s biggest taxi company, Mr. Taillefer’s privately held company Taxelco will have three taxi brands and a fleet of about 1,720 vehicles. He said scale is key to making money and improving the experience for consumers.

At the moment, not enough Téo vehicles are on the streets to meet demand, especially during rush hour, Mr. Taillefer said on Tuesday. Taxelco has calculated it needs about 1,600 vehicles to meet the expectations of Montrealers, and buying Diamond allows the company to accelerate a previous plan to expand to that volume.

Mr. Taillefer said Taxelco intends to transform the Diamond and Hochelaga fleets to electric, as with Téo, once an affordable vehicle is available that meets the daily requirements of a full-service taxi company. Téo uses Kia Soul and Nissan Leaf all-electric vehicles, but their limited trunk space makes airport runs difficult. It also uses Tesla cars, but they are too expensive to buy in major numbers.

Taxi Diamond is strong in Montreal’s central core, while Hochelaga is strong in the eastern end of the city. Their drivers are self-employed, while Téo’s drivers are full-time salaried workers earning about $15 an hour plus benefits.

Mr. Taillefer said he hopes to persuade at least half of all his drivers to become salaried employees.

Other cities in Canada are also ripe for a transformation to all-electric transport, he said, signalling his ambitions to expand to other parts of the country through acquisition. He said he is also interested in taxi buses, school buses and the delivery business.

“We want to build a very sophisticated transportation cocktail for Montrealers, and we think this has legs and could be replicated elsewhere.”

Mr. Taillefer said Taxelco will make no further acquisitions in Montreal. The transaction is not subject to any antitrust hurdles. What Taxelco is buying in Taxi Diamond is essentially a dispatch and marketing service company. Drivers pay a monthly fee to get access to calls. Taxelco wants to change that model over time and integrate drivers into a homogeneous fleet.

His private equity firm, XPND Capital, launched Taxelco in 2015. XPND’s investors include the Caisse de dépôt et placement du Québec as well as the FTQ Solidarity Fund and Fondaction. National Bank of Canada is his main lender for Téo, and Element Financial is the vehicle fleet financier. Although he is a wealthy individual, Mr. Taillefer does not own a car, and is a frequent user of taxis, ride-sharing services and public transit.

The deal comes at a time of upheaval for Canada’s taxi industry as Uber, Lyft and other ride-sharing services that operate outside long-standing regulations have disrupted the market. Municipalities have struggled to find the best way to regulate Uber, with some, such as Ottawa, opting to legalize the service, while others, such as Mississauga, have banned private vehicles-for-hire.