Structural Challenges in the Taxi Industry: 'Companies Failing Despite High Demand'
Resilient Demand, Disconnected Profits, and the Pain of Transition
I usually post analyses of home ownership and the real estate market from a macroeconomic perspective, but this time I am taking a slightly different approach.
As an active taxi driver working on the front lines, I have observed the structural challenges of this industry for many years.
I don't usually discuss taxi industry topics, but this time I want to focus on and delve into the paradox of 'companies failing despite high demand.'
This issue is not limited to the taxi industry alone.
As the polarization of mobility services becomes more pronounced, it is expanding regional disparities and ultimately becoming a factor that affects regional convenience and real estate prices.
The Paradox of Failing Companies Despite High Demand
In fiscal year 2025 (April 2025 to March 2026), the number of taxi operators exiting the market reached a record high by a significant margin.
According to a survey by Teikoku Databank, there were 66 cases of suspension, closure, or dissolution (1.6 times the 40 cases in the previous fiscal year, a record high) and 36 bankruptcies, totaling 102 cases. This is the first time since fiscal year 2000 that the number has exceeded 100.
Despite the continued situation where 'there are customers' and 'there is work' due to the spread of ride-hailing apps, the recovery of inbound tourism, fare revisions, and tourism demand, closures and bankruptcies are surging. This paradoxical phenomenon symbolizes the 'disconnection between demand and profit' that the industry is facing.
Structural Challenges Across the Industry
As this graph shows, the number of exits, which had been stable at a relatively low level in the 2010s, has gradually risen since around 2019, surging to 82 in 2024 and 102 in 2025.
The paradox that 'companies fail despite demand' is clearly reflected in the numbers.
1. The Vicious Cycle of Driver Shortages and Recruitment/Retention
The number of drivers has decreased by approximately 17% compared to 2019, and the average age is aging, hovering around 57 to 60 years old.
The effective job opening ratio is a tough 3 to 4 times, and while many companies are strengthening recruitment, retention rates are low, and cases where drivers resign before recruitment costs are recovered are prominent.
In a situation where recruitment standards have to be lowered, missed sales targets, accidents, and complaints increase, and repair costs directly hit profits.
In the taxi industry, where profit margins are low at around 1% nationwide, this burden is particularly fatal.
2. The Direct Hit of Rising Costs
Soaring fuel costs (especially LP gas), fixed cashless payment fees, and upward pressure on labor costs are overlapping, leading to a situation where more than 60% of companies are seeing declining profits or deficits despite increased revenue.
Among companies whose financial results for fiscal year 2024 are known, profit growth remained at only 33.4%.
3. Expansion of Scale and Regional Disparities
Most bankruptcies and closures are concentrated among small and micro-enterprises with liabilities of less than 100 million yen and fewer than 5 employees.
Large companies with financial strength have an advantage in securing human resources and app compatibility, and restructuring (M&A) is accelerating.
The Impact of Ride-Hailing Apps
Ride-hailing apps (especially GO) have brought significant benefits, such as capturing potential demand and visualizing demand (AI heat maps).
In the Nagoya area, GO holds an overwhelming share of around 68%, and support for multiple apps is progressing.
On the other hand, disadvantages such as the burden of commission fees, a decline in drivers' skills for cruising/waiting at stands, and excessive reliance on apps by young people are also becoming apparent.
The spread of customer rating systems via apps has created a mechanism that visualizes and weeds out poor-quality drivers, forcing companies without proper education and training systems to face the risk of low ratings.
As a result, the shift from mere transportation to a service where hospitality is highly valued is accelerating.
This resilience in demand is also highly valued by investors.
The fact that GO raised 10 billion yen from Goldman Sachs in 2023 is a symbol of this.
Acceleration of Polarization and Challenges in Regional Cities
Large companies with financial strength are expanding their scale through M&A, etc., and the survival of excellent companies and excellent drivers may lead to improved convenience for users in urban areas. On the other hand, small and medium-sized enterprises are easily forced to exit.
The problem is particularly acute in regional cities.
Taxis have supported daily transportation such as trips to hospitals and shopping as a supplement to route buses and trains.
If taxi companies exit, there are few alternative means, and there is a high risk of leading to mobility restrictions for the elderly and the expansion of regional disparities.
Challenges of the Employment Environment and High-Incentive Structures
The base salary plus commission (AB type) system adopted by many taxi companies reinforces the image that skilled drivers can earn well, while simultaneously making it easier for less skilled drivers to quit. This is very similar to the
mismatch in high-incentive structures that I have observed for many years in the real estate industry. The phenomenon of top-tier drivers in rural areas migrating to urban centers is also further exacerbating labor shortages. When hiring younger generations, developing career advancement programs in addition to training is essential for improving retention rates.
Future Outlook
Autonomous driving is still in the demonstration phase and will take time to be fully implemented, and the recruitment of foreign drivers is hindered by the barrier of Japanese language proficiency (especially when dealing with senior passengers). In urban areas, polarization is progressing, and we can expect service quality improvements from top-tier companies. Meanwhile, in rural areas, the risk of public transportation gaps is becoming a reality. While the resilience of demand and the progress of digitalization offer opportunities for transformation, the deep-rooted nature of these structural challenges will not be easily resolved.
Summary: Between Resilient Demand and Structural Challenges
The taxi industry, regardless of whether it is in urban or rural areas, recorded a record-high 102 market exits in fiscal year 2025, despite the underlying resilience of demand where 'customers are there and work is available.' The '
disconnect between demand and profit' pointed out by Teikoku Databank is the result of a complex interplay of structural issues, including driver shortages, rising costs for fuel and commissions, the dual nature of ride-hailing apps, a vicious cycle of recruitment and retention, and the acceleration of polarization. Especially in regional cities, taxi exits carry the risk of eliminating the complementary functions of public transportation, further widening regional disparities. On the other hand, well-funded major companies continue to grow using M&A and app efficiency as weapons, which could lead to improved user convenience as top-tier companies and drivers survive. The challenges of high-incentive structures that I have seen for years in the real estate industry (where people are attracted by the image of high earnings, but a mismatch occurs when they cannot achieve results and leave) apply directly to the taxi industry as well.
Optimizing the balance of evaluation criteria, visualizing operations through DX, and developing career advancement programs will be the keys to improving retention rates and industry revitalization
. The pain of this transition period is deep-rooted. However, the resilience of demand and the progress of digitalization are also opportunities for transformation. The future of the taxi industry depends on how calmly it can analyze these structural challenges and proceed with responses that leverage on-site expertise.
Sources and References
Teikoku Databank: Trends in Bankruptcy, Suspension, and Dissolution of 'Taxi Businesses' (Fiscal Year 2025), announced April 4, 2026
MM Research Institute: 'Survey on Mobility Services' (August 2024)
GO Inc. Official Announcement (related to Goldman Sachs investment, May 2023)
Ministry of Land, Infrastructure, Transport and Tourism related materials and reports from various taxi industry companies (number of drivers, app usage rates, etc.)
