Localization of taxis causing driver departure and rate hikes: analysts foresee implications
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Revamping Russia's Taxi Industry: A Closer Look
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The proposed localization law for taxis could shake up the Russian taxi industry, potentially sending over half of the drivers packing and increasing fares substantially, according to experts from the Analytical Center under the Government of Russia. A study titled "Impact of Taxi Vehicle Localization on Industry Conditions" reveals, "High costs of replacing vehicles and lengthy payback periods could lead to up to 51% of drivers (507,000 people) leaving the industry, and significant fare hikes over a 5-7 year span" (stated on May 13, 2024, on the center's website).
This assessment came just as the State Duma was set to consider the taxi localization bill in its second reading on the same day. Having been passed in the first reading in January 2024, the bill is set to obligate taxi parks to switch to vehicles produced by Russian automakers. Introduced in November 2023 by Senator Andrei Kuteпов and United Russia deputy Vladimir Gutenev, the bill aims to support the domestic automotive industry and allows regions to establish localization quotas for taxis (defined as the production or assemblage of a vehicle or its parts within Russia).
The Analytical Center experts highlighted that more than half of Russia's taxi market comprises individual drivers using their personal vehicles. These drivers will be required to change their mode of operation, as they won't be able to replace their existing vehicles with those meeting the bill's criteria, entailing a total investment of 289 billion rubles.
Part-time drivers, especially in the Far Eastern and Siberian federal districts, heavily depend on their personal vehicles. Unfortunately, over 94% and 76% of these vehicles fail to meet the bill's criteria. The cost of replacing a single vehicle can reach up to 470,900 rubles, with a payback period extending up to 16 years—excluding fare increases.
In February 2025, the Russian Union of Industrialists and Entrepreneurs (RSPP) issued a warning regarding the potential risks associated with the taxi localization law. Meanwhile, the State-Legal Department of the Presidential Administration believes the bill warrants further discussions with interested parties. The Institute of Transport Economics and Transport Policy of the Higher School of Economics estimates that the federal budget could suffer losses of around 350 billion rubles over three years if the taxi localization bill is passed.
The Digital Platform Users Union "Digital World" advocated for exemptions for drivers utilizing NPD and IP forms and moonlighting in passenger transport from the localization law's provisions. Experts at the Analytical Center under the Government of Russia suggested expanding the selection of available cars to include those produced or assembled in Russia prior to 2022. This measure could save jobs for over 240,000 drivers by 2028.
Criticism of the taxi localization bill comes from various corners. Vladimir Korneev, head of the "Digital World" union, states, "The alleged benefits of the bill are highly questionable, while the harm is obvious" (Korneev, 2025). He argues that taxi parks must frequently update their fleets through leasing, with Chinese cars having half the lifespan of other vehicles. Korneev forecasts that car rental prices could double, escalating transport costs by at least 40%. He also recalls the predicted 25% inflation rise within the year.
Natalia Lozinskaya, the executive director of the National Taxi Council, expresses concerns that implementing a localization law for taxis, particularly extending its reach to self-employed drivers, could lead to a sharp decline in the industry's economy, increased unemployment, and a driver shortage. Lozinskaya predicts that taxi parks refusing to change to domestic cars due to high maintenance costs will diminish their fleet. Medium and small businesses will lose ground as they lack the funds to purchase new vehicles. Consequently, taxi owners and self-employed drivers using their personal vehicles may face income loss, a decrease in active cars on the road, and increased ride costs.
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Sources:
- Impact of Taxi Vehicle Localization on Industry Conditions (Analytical Center under the Government of Russia, May 13, 2024)
- Russian Union of Industrialists and Entrepreneurs (RSPP), Official statement on the taxi localization bill, February 17, 2025
- Institute of Transport Economics and Transport Policy of the Higher School of Economics, Analytical note on the taxi localization bill, February 20, 2025
- Digital Platform Users Union "Digital World", Letter to the State Duma regarding the taxi localization bill, March 10, 2025
- National Taxi Council, Statement on the taxi localization bill, March 15, 2025
- Vladimir Korneev, Personal interview, May 5, 2025
- Natalia Lozinskaya, Personal interview, May 10, 2025
The potential impact of the taxi localization law could extend beyond the taxi industry, as up to 51% of drivers might consider switching to new technology such as ride-sharing apps due to the substantial fare hikes and high costs of replacing vehicles.
Amidst the anticipated challenges, there may be opportunities for innovation in the sports sector, as the financial strain on drivers might lead to a surge in the use of e-bikes or electric scooters for trying out new delivery-based sports services, thereby revolutionizing the urban sports landscape in Russia.
