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Why the socially conscious Téo Taxi business model may have been its destruction

It was announced as another taxi company – one that was environmentally friendly and could compensate drivers.

The Téo Taxi was completely electric, and its drivers were paid by the hour, not by tariffs. They also received benefits, including paid weekends.

When an application-based service was launched in Montreal in 2015, company founder Alexander Taylefer promised “the best and most friendly service in the city.”

Drivers wore uniforms and opened doors for customers who were given a choice of music and access to a charging station for their electronics.

And since controversy arose around Uber and its taxi competitors, former Prime Minister Philippe Cuyar called Téo a model for the future of the industry.

The parent of Teo Taxi, Taxelco, received $ 9.5 million in government grants, and the Kuyar government allowed a loan of $ 4 million.

Caisse de dépôt et Place du Québec, a provincial government pension fund, and Investissement Québec, a provincial business development fund, also contributed funds a year ago to help expand the park.

On Tuesday, the company ceased operations, leaving 450 people without work.

“Téo Taxi today is not yet profitable and, above all, no longer has the support necessary to continue its activities,” said Dominic Becott, co-founder and chairman of the company, at a press conference.

Taillefer, proclaimed by the innovator and the success story of Quebec – and the man who led the provincial liberals election campaign last fall – was not at a press conference. He rejected the request for an interview.

Alexander Taillefer poses in 2015 with his new fleet of electric taxis. (Ryan Remiares / Canadian Press)

Something went wrong?

In recent weeks, there were reports that Téo Taxi had financial problems, and Taillefer was looking for protection from creditors.

Customers complained that they were left waiting, and they had to call another company.

A representative of the union said that sometimes there are problems with the effective charging of cars.

The company's business model, which included hourly wages of more than $ 15 per hour after receiving the tip and expensive fleet owned by the company, was a big part of the problem, says Jean-François Huelle, associate professor of entrepreneurship and innovation at HEC Montréal.

Taking into account that Uber drivers use their own vehicles and earn money only during the trip, Téo Taxi taxi drivers are guaranteed income regardless of their employment.

This meant that Téo Taxi should have been able to predict how many drivers should be on the road at a given time — something that he hadn’t yet figured out, Ouellet said in an interview RDI Économie,

Uber, on the other hand, benefits from greater “dexterity” and “flexibility” in the way it responds to demand.

George Bussios, a spokesman for Taxis du Grand Montréal, says the company was doomed from the start. (CBC)

George Bussios, a spokesman for Taxis du Grand Montréal, an association of taxi companies in Montreal, said the business plan was doomed to fail from day 1.

“I was not surprised,” he said, suggesting that Quillard Liberals was kept afloat.

"As soon as the CAQ appeared, we doubted that they would provide the same support as the liberals."

He also said that hourly wages for an eight-hour working day are not a realistic way to make money.

“You ask any taxi driver in Montreal, in eight hours he probably just made his gasoline. You have to spend 12-14 hours to make a living, ”he said.

“Let's just assume it's $ 120. There the machine did not bring $ 120 in eight hours. ”

“Ambitious and transformative” if it worked

Nura Jabagi, Ph.D., who studies the digital workforce at the Sh. John Molson at Concordia University, said that the fight against the international giant Uber was a big problem, given the high cost of labor and the expensive fleet of cars Téo Taxi.

“It really didn't help his situation,” she said.

“It's sad that Theo has failed, because I think there is a place for a local, socially conscious model.

“I think there is room for some intermediate level. I think Theo might have tried to go too far in another direction. ”

Nura Jabagi, PhD at the School of Business. John Molson at Concordia University, closely following the company. (Concordia University)

A report on the Téo Taxi website, published shortly after it ceased operations, acknowledged that paying hourly wages to drivers was a problem.

As well as the high operating costs of the Teo Taxi electric fleet, and the strict rules of Quebec that govern the taxi industry, which did not allow the company to raise rates.

On her website, Téo Taxi thanked customers for their faith in an “ambitious and transformative project for a greener and more inclusive world.”

“Thanks to you, we covered 24.9 million kilometers and prevented emissions of more than 5,000 tons of greenhouse gases in three years in Montreal,” the note says.

"Unfortunately, now we must stop our activities."

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