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Electric vehicle market has paved the way for developing a cleaner and no carbon emission method to transport passengers and cargo. Electric cars are verified to have low maintenance expenses as most of the portions that cause breakdowns in traditional fuel-powered vehicles are emission technology.
There are three customer segments for Electric Vehicle Taxi Company, which are:
Active environmental segment: This customer segment has a healthy biosphere and altruistic values, through which they are enthusiastic about adjusting their lifestyle. They consider that climate change, global warming, and air pollution are serious concerns.
Technology savvy segment: This customer segment has strong self-enhancement values and a desire to use the latest technology. They are possible to have informed themselves regarding electric cars.
Low flexibility environmental segment: This customer segment is environmentally motivated, but not as possible to be open to change, and they are less flexible in their lifestyle. Plug-in hybrid electric cars are preferred by this customer group, as they permit them to minimize their environmental impact without considerable lifestyle changes. These three customer groups present a significant opportunity for Electric Vehicle Taxi Company. They have certain traits like high and medium-income levels, increased education, and geographically dispersed.
Electric vehicles are mostly concentrated on private users. Customers who use taxi or cab require responsibility. Apart from reaching the destination on time, saving the environment is another responsibility. In present days, customers have become concerned about the environment and the pollution caused by traditional fuel-based vehicles. Therefore, they will certainly book a green cab if they have an eco-friendly option for taxi booking. This will allow the new business, where customers will appreciate the responsibility not only towards the passengers but also towards the environment (Limo Labs, 2020).
Irrespective of the benefits of electric vehicles, their adoption in the taxi segment is still limited. The majority of the taxis use fossil fuel due to low cost. The driving range of the electric vehicle is also low in comparison with the fuel-powered vehicle due to infrequent charging stations than fuel pumps. It also requires a long time to set than refueling the cars. Still, electric vehicles’ usage is growing. There is a considerable possibility of these vehicles in the taxi segment with improved fast charging technology and growth in charging points across different cities in the UK. This will enhance the average number of trips by electric vehicles in a day than fuel-powered taxis. The new business will help to fill this gap between electric taxis and fuel-powered taxis in the industry.
Opportunity for the Service
The UK has a robust infrastructure and adequate electric supply, which makes electric cabs more sense. At present times, electric vehicles cost twice in comparison with a diesel vehicle, but the running expenditures are relatively low, therefore compensating 10% to 30% of the purchasing costs. The cabs are priced at approximately £55600, costing the drivers £177 per week for five years and is expected to reduce in near future with the development of technology. It also runs at almost a similar speed as diesel engines. The suspension and breaks are even better, saving around £100 per week on fuel. The electric cab will provide similar quality taxi services to the passengers (Wagner, 2017). Therefore, it can provide an excellent opportunity for the new business.
Current Market Trends
According to Boztas (2017), at the beginning of 2018, newly licensed taxis in London should be of low emission. They should be capable of driving on electric power for a minimum of 48 kilometers with limited emission. London intends for the greenest taxi fleet globally due to the health crisis that derives from polluted air. Taxi contribute around 16% of NO2 and 26% of tiny particles, and electric fleet can minimize NO2 emission by 50%. Therefore, in London, the government intends to transform all black cabs and private taxis to be capable of zero-emission by 2033 and change the whole transport system to zero-emission by 2050. To make this possible, the government has granted £18 million for installing 75 quick charging points that recharge the cars within 30 minutes and £300000 for on-street charging points. Soon other cities in the UK will also move to a similar course. As a portion of the government's commitment to making each vehicle in the UK emission-free by 2050, the Government’s 2040 Ambition is to end the sale of new conventional fuel-based cars by 2040. This gives sufficient opportunity for the new business to operate electric vehicle taxi services in the UK as it is future.
Business Risks and Competitor Analysis
There are various risks for the new electric cab business. The first critical risk of the company is related to the battery component of the electronic vehicle. It is the most costly component of the electric car, and since the technology is in the developing phase, there is a threat of low battery life, owing to fast charging. Furthermore, there are also risks of low power quality and fluctuation in voltage for electric vehicles. Therefore, in an unlikely instance, if the battery is damaged severely owing to any causes, after the warranty period, it would result in great financial loss and hence significant business risk. The second substantial risk of the business is the high retail price of an electric vehicle. Presently, the cost of an electric car is much higher than a fuel-based vehicle, which will increase the cost of business. Therefore, it will create an increased risk for obtaining sufficient capital to run the business. The third risk is related to the operating hours of the business. A taxi company can run fuel-based vehicles for about 250 to 280 kilometers within 12 to 13 hours a day. In contrast, electric cabs can run for about 180 to 200 kilometers per day, considering 12-hour work (EVReporter, 2020). This will generate another risk for a business to compete against the key competitors that are diesel vehicles of petrol-based cars.
P2: Business Plan
The business plan is based on creating an electric vehicle taxi company in the UK, whose vision is to give reliable, timely, and secure taxi services through using computer-supported dispatch and card-based services. The company will establish its existence in the taxi industry by acquiring electric vehicles. The company will deliver comprehensive taxi services by utilizing the latest technology to facilitate environmental sustainability in the UK. The products and services of the business demonstrate that the company is an innovative and forward-thinking company that not only recognizes the requirements of customers but also the needs of society. The new business will focus on services and communication, realizing that protecting the environment is also a responsibility of any company. The company also understands that in a competitive environment with other taxi companies, flexibility and professionalism are also vital to maintain a competitive advantage.
Summary of Proposition
The company will have expert drivers and skilled employees that are co-operative, well-mannered, and thoroughly trained. As an added safety measure for the drivers and the passengers, all the cabs in the company will be fitted with GPS and camera systems, empowering the company to track the cabs during any emergency. Each taxi will be clean, well maintained, and examined regularly for safety and comfort.
Legal Structure and Operation
The company will be a partnership business. There will be five partners who will contribute finance and knowledge for operating the business.
The company is seeking financing of £1.8 million to fund the business and fund the initial business functions. The funding will cover the purchase of electric cabs, marketing, software, hardware, offices, and payroll. The potential sources of finance will be personal capital and bank loan. About 20% of finance will be provided by the personal wealth of the five partners, and the rest, 80%, will be covered by a bank loan. Therefore, it is expected that £1440000 will be obtained from a bank loan..
Summary of Markets and Competition
The taxi industry in the UK was about £10 billion in the year 2015 and is increasing. In the UK, currently, there are two-tier system functions, where there are two common forms of the taxi. One is known as black cabs or taxis, and the other is known as private hire vehicles, also termed as minicabs. The taxis can wait at rank, be hailed on the street, or be pre-booked on phone or smartphone applications or corporate website. The charging fee is done through the meter and is set by the local council every year (Cab Direct, 2020). The private taxi hire business in the UK tends to be dominated by various taxi companies, who advertise and compete against each other to attract customers. Frequently booking is organized by utilizing a computerized communication system. Irrespective of low economic situations and looming uncertainty around Brexit, the taxi industry in the UK is managing to grow. However, there are instances of large taxi companies acquiring small competitors. The top 100 private hire operators in the UK increased their joint fleet from an adjusted base of 57776 at the beginning of 2018 to 58897 at the end of 2018, indicating 1.94% growth, where the overall fleet increased by 3438 cars in 2018, signifying growth in 6.28% in comparison with 3.57% in 2017. Although the public hire taxi trade has been much longer, there are more private hire vehicles, around 165000, almost double than public hire taxis, about 90000. Due to its advantages as the commercial and political capital of the UK, London alone claims 22000 public hire taxis and above 50000 minicabs (Enoch, 2018). For the new business, the top ten competitors in the UK will be as follows.
The majority of taxi companies follow a similar organizational structure, where company owners operate the business, hire drivers and perform other managerial responsibilities. Correspondents take calls and assign cabs to the location of the passengers. The correspondent position once signified a promotion granted to knowledgeable taxi drivers, whose understanding of the city makes them best capable for the task. Nevertheless, growth in computer-oriented dispatching has promoted taxi organizations to support computer abilities over particular knowledge of local geography when filing the correspondent position.
It is the company's objective to use an aggressive marketing campaign and, from that, penetrate about 15% of the market share within the next five years. It is the company's objective to achieve around a net profit margin of 27% within the second year of operation and to increase the net profit margin to 39% within the third year of operation. The company also intends to control the financial expenditures and seek investors to invest in the business for further expansion. It is the company's goal to increase the number of cabs by five within five years of operation. Besides, the company will also intend to minimize the operational expenditures of the cars by enhanced preventive maintenance and behavior adjustment so that drivers and other employees act responsibly.
The non-financial performance objective of the company is to become one of the top-rated transportation organizations in the UK within five years. It will establish a good relationship with the customers and other key stakeholders. This will empower the company to observe a variety of services to enhance customer satisfaction. The new business has innovative technology, which will provide additional advantages for being a responsible company. The objective of the new business is to saturate the market with a new product, depicting that the company is a pioneer in providing electronic cab services. The company will leverage the latest models in electronic technology to dominate this segment, as electric vehicles in the taxi segment are a new concept of business. It will be the strategy of the company to create a reputation and substantial market share in the target market through establishing electronic cab service offerings as a viable substitute to current fuel-based taxi services. It intends to obtain the confidence of the customers and establish itself as an organization that gives superior customer services through utilizing modern technology and by providing well-timed and reliable cab services.
The customers of the new electric cab business can be classified into two groups, one is family or individual customers who take a cab for pleasure trips, and another one is business travelers.
This target customer takes a trip to a cab for pleasure. They can either be an individual or a family. This target customer group does not usually mind paying much for a quick transportation solution, such as going to a station or airport. Since they are on vacation or are in a hurry to go to a specific location, they appreciate having a cab service that gets them to the desired location in a seamless way so that they do not require to worry regarding anything. This type of customer makes a booking and presents at the appropriate pickup point.
This target customer comprise business traveler or service persons going to work. Traditionally companies use limousine service to pick up the employees. However, with cab service as a substitute, there is a transportation service that acts like a limousine, where customers can pre-schedule pick updates and be taken directly from home to the desired location. This customer segment does not prefer high prices or fancy vehicles. Since they like to reduce expenses, they want a reasonable transportation solution concerning comfort and cost.
Relevant Market Segments
The active environmental segment is the relevant market segment for the new business because they are highly concerned about the environment and prefer electronic cab service over fuel-based cab services. Furthermore, the new company will focus on both family/individual travelers and business travelers. Concerning income, it will target the medium income group people in the UK. The target customer segments will be inspired to utilize the taxi services over the competitors because of environmental value, convenience, and quality.
Size, Structure, and Trend in the Market
In the UK, the revenue from the taxi segment is expected to reach $9570 million in the year 2021. The income of the taxi segment is forecasted to demonstrate a yearly growth rate of about 6.3%, after a projected market volume of $12214 million by the year 2025. The user penetration in this segment is 26.7% in 2021 and is forecasted to become 27.2% by 2025. The average income per user in the taxi segment in the UK is predicted to be $529 (Statista, 2020).
The competitive threats arrive from the current taxi companies functioning in the UK. Many companies are owned by more giant holding corporations and had functions that reached beyond the local and regional area. Many industry leaders in the market will give intense competition to the new business. However, their crucial weakness is that they use traditional fuel-based cars. Furthermore, some do not have a card payment system. The competitive advantage for the new business will be cutting-edge electronic technology, which is unique in the taxi industry, and a GPS that will empower the taxi to give timely services through providing an accurate ETA. The card system will provide the passenger's convenience and privacy for the financial transaction (Ibisworld, 2020).
Product: The essential development of the new business is to provide taxi services. It is believed that the customers will select the taxi company based on the following criteria.
Size, Structure, and Trend in the Market
Performance: The company will perform with one objective in mind, i.e., to get customers where they desire to go and when they desire to go, promptly, effectively, comfortably, and safely.
Size, Structure, and Trend in the Market
Quality service: The company will concentrate on-time pickup, private utilization of taxis, and customer care.
Responsible company: This feature comprises being responsible towards the environment, delivering well-mannered service, and having clean and well-maintained vehicles.
Convenience: The new business will provide comfort in terms of the payment system.
Price: The new business will use a competitive pricing strategy, i.e., the services' cost will be set based on market value. The pricing will be based on per trip rate, where a slight discount will be provided for round trip services.
Place: By this kind of business, the cab services will occur wherever passengers require to be. Initially, the services will be offered to famous cities of the UK. Customers will be able to avail themselves of the services through booking, which can be made through the online application or company website.
Promotion: The new business will promote the cab services through advertisement. It will use both online advertising and print advertisement to promote the services. Besides, it will also make strategic relationships with people to advertise the services. The print advertisement will be placed in the local newspaper with the highest readership level in the area. The ad will appear in the weekly travel section. On the other hand, the online advertisement will be placed through social media.
The company will also perform with taxi associations and community groups to develop a strong network of users. It is considered that performing with them will provide the company with a steady stream of passengers. Furthermore, as a lot of these groups are close-knit within members, referrals will be possible. The company will develop contact with the travel organizations to tell the passengers regarding the taxi services and provide them with introductory discount, to create awareness. It is essential for developing initial contact with people. This contact will transform into a steady stream of business. Moreover, there will be advertisements targeted at both customer segments.
M1: Analysis of Financial Information
The following table demonstrates the organization’s cash flow for three consecutive years. It is believed that £1.2 million will be spent on acquiring the cabs, and £54900 will be spent on purchasing additional fixed assets. Apart from that, £31800 will be spent on buying computers and hardware. Initially, there will be cash in hand of £40200 for funding the operations.
The electric cab business is in the initial phase of development; hence early forecasts have only been made on accounts that are considered to drive the income statement. Following is the projected income statement for the electric cab business for three years.
It is expected that the long term interest rate for the loan will be 0.57%. Furthermore, the loan tenure will be 10 years, and the principal amount will be paid from the third accounting year. It is believed that the income tax rate will be 25%. Due to high initial expenses, the company will not see any profit in the first accounting year. However, the company will realize a profit from the second year. Following is the total expected start-up requirements for the new compan
Statement of Financial Position
The following table demonstrates the projected statement of financial position for the new business for three years.
It is expected that the depreciation rate for furniture and fixture, computers and equipment and cabs will be 10%, 15% and 30% per annum respectively.
To understand the liquidity performance of the business, the current ratio is used. The following table demonstrates the projected current rate of the new company for three years.
From the analysis, it can be predicted that the company will have twice as much as current assets compared to current liabilities as its current ratio in the initial phase is 2.09, and it will increase in the second year to 8.3. However, due to paying the principal amount of the loan, the current ratio will likely become 5.05. Still, it will have sufficient existing assets to pay the current dues. Therefore, the liquidity performance of the company is expected to be healthy.
To measure the profitability of the company, the gross profit margin and net profit margin is used. Following is the projected gross and net profit margin of the new business for three years.
Based on the analysis, it is forecasted that both the gross profit margin and net profit margin of the company will increase. The net profit margin is expected to be 31.59% in the third year, indicating that with revenue of £100, the company will earn a net profit of £31.59.
To understand the performance ratio, the asset turnover ratio is considered. Following is the forecasted assets turnover ratio of the new business for three year
Based on the asset turnover, it is expected that it will become 19.26% in the third year, specifying that with £100 invested in assets, the company will earn a net profit of £19.26
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