On January 29th, 2019, Quebec entrepreneur Alexandre Taillefer announced that his brainchild, Téo Taxi, would be shutting down and laying off its 450 drivers. That’s right, the iconic green and white Tesla that you’ve seen (probably from the backseat of your Uber) is no more. Téo had a noble objective: become the first socially and environmentally conscious taxi service in Quebec. With 41 million dollars of public funding, which included many provincial government subsidies, the future appeared bright for Téo. However, it wasn’t long before Quebec’s stringent taxi regulations, Téo’s faulty business plan, and heavy competition in both price and service put up roadblocks Téo could not overcome.
However, it wasn’t long before Quebec’s stringent taxi regulations, Téo’s faulty business plan, and heavy competition in both price and service put up roadblocks Téo could not overcome.
In 2019, being socially and environmentally conscious is the name of the game. However, while industry and technology have made great strides, the affordability of living in such a manner still has miles to go. Téo believed in wage equality for their workers, and thus implemented a fixed salary rate for workers at $15 an hour for 8 hour shifts, no matter how many fares each driver received or the time of day. In principle, this seems like a decent cause. However, in practice, anyone could see the faults in this compensation scheme. As stated by George Boussios, spokesperson for Taxis du Grand Montreal, “There’s no way that car brought in $120 in eight hours.” Logically, the fact that each driver is getting paid no matter their effort could contribute to lower service and laziness among drivers. Moreover, creating Téo’s infrastructure had astronomical costs for the company. Implementing a fleet of Teslas (some of the most expensive cars on the market) and other environmentally conscious vehicles like Prius’ and Kia Souls, as well as the charging stations to go along, led to massive fixed costs for the company.
Additionally, while a typical company may raise their rates to cover fixed costs, Téo was established as a federally recognized taxi service in Quebec. Under this status, Téo was unable to raise their rates above governmentally allowed fares under S-6.01 – The Act Respecting Transportation Services by Taxi. The inability to affect their prices gave Téo a competitive disadvantage behind its main competitor, Uber, in that Uber could implement “surge pricing” depending on the time of day or level of business when the rider would use the service. Given that Téo could not bolster its revenues alongside these high costs, they sunk deeper into the hole their business plan created. With the high cost of operation, inconsistent service, and competitive advantage Uber introduced, Téo found itself in a precarious position only a year after launching.
The inability to affect their prices gave Téo a competitive disadvantage behind its main competitor, Uber, in that Uber could implement “surge pricing” depending on the time of day or level of business when the rider would use the service.
As a result of its shortcomings, Téo received 9.5 million dollars in grants from various provincial governments (likely backed by the money of Canadian taxpayers), as well as a 4 million dollar government loan. At the time of its shutdown, Taillefer stated that his entire investment in the company was lost, after paying back the money to Téo’s various creditors. Additionally, Taillefer’s open letter to Quebec Premier Francois Legault outlined the reasoning behind Téo’s failure, and how Quebec can still make use of Téo’s resources and infrastructure. In his five point address, Taillefer states that Quebec’s “unfair and outdated regulations” drowned the project, and that Quebec’s stance on price flexibility allows rideshare companies to run taxi companies down. He also claims that Téo’s ecological infrastructure is something that Quebec needs to preserved, and Taillefer has basically asked that the Hydro-Quebec purchase it from the company. Taillefer’s final major point outlined the governments support of Téo’s Technology, and the support of Téo’s app to other companies, which he states has been extremely well received by the general public with a 4.6 rating on the Google Play Store.
It is currently unknown as to how Legault responded to Taillefer’s pleas, but Pierre-Karl Peladeau, a former politician and extremely wealthy Canadian businessman, has shown interest in purchasing the business. While the Teslas will be missed, at the end of the day, Téo Taxi’s failure poses a greater question for the future. With the incredibly high costs of operation accrued to run a “socially conscious” company, alongside legislative concerns, is it feasible for such companies to exist in Canada today?