Tuesday, March 30, 2010

Update on the NYC "Taxi Cartel"; Medallion Prices Reach Record Highs in 2010 of $588k and $779k

The "priciest piece of aluminum in NYC" - a taxi medallion to operate a single cab in NYC - reached a new record-high of $588,000 in February for an individual medallion (see chart above, data here), more than double the average prices in 2004. The average price for a corporate-owned taxi medallion reached a new record high in January at $779,000, and fell slightly in February to $775,000.

Membership in the "taxi cartel" certainly has its privileges: above-market returns of 20.75% per year for corporate medallions and 15.32% for individual medallions in a permanent bull market. See previous CD posts here,
here and here.

8 Comments:

At 3/30/2010 8:43 AM, Blogger Steamboat Lion said...

There's really no sound reason to regulate taxis, especially in the internet age where most of the information asymmetry and transaction costs can be eliminated.

But if you must protect the poor gullible consumer, the next best solution is to regulate quality but not numbers.

Restricting taxi numbers is the worst possible solution. You couldn't design a better system for capture by special interests.

The one silver lining is that the system provides the evidence of its own guilt; the medallion prices are it. In a market in which supply and demand are in line, the medallion would be worth zero.

 
At 3/30/2010 11:47 AM, Anonymous Anonymous said...

This is why in some towns with highly regulated taxi industries, it is sometimes cheaper to take a limo than a taxi.

 
At 3/30/2010 12:23 PM, Anonymous Benny The Man said...

In Thailand, there are numerous "baht busses," which are nothing more than a pick-up truck with bench-slats running over the rear wheel wells, and a modest roof.

The private operators naturally gravitate to routes where there is the most demand. Even semi-personal service is possible--if Mr. Baht Bus knows that every morning Ms. Farmer stands in front of her house, he naturally slows down there and toots.

I fume when I think that this high-mpg solution in America is impossible, probably due to the running gaggle of lawyers and safety nuts we have that seem to dominate the transportation industry.

Digression: The Baht Busses are deployed as ad hoic ambulances after motor vehicle accidents. After one motorcycle accident I witnessed, bystanders put the injured motorcyclist into the back of the baht bus, and he went to the hospital. Nobody complained among passengers or driver.

Imagine the falderal and expense of an ambulance in the Unted States.

 
At 3/30/2010 1:10 PM, Blogger John Thacker said...

Limiting the number of taxicabs hurts the poor and those in outer boroughs the most. The limited supply of cabs will obviously congregate in the wealthiest area with higher demand. If it weren't for city authorities turning a blind eye to the gypsy cabs, there wouldn't be any service in poor areas at all.

 
At 3/30/2010 1:38 PM, Anonymous morganovich said...

anybody know what the rent for a corporate taxi medallion is? (what do cabbies pay to use it)

just wondering what the actual yield is on a $799k investment.

if is say $75/shift as an avg X 3 shifts day X 350 days (this is manhattan) then it's roughly $79k/year.

that's a 10% yield. i have no idea what the costs are, so i can't figure that precisely, but let's take a cut at it. even if maintenance is $5k/yr and gas = $45/day X 350 days = $16k and depreciation and insurance are another $7k yr, that's 28k in costs leaving $51k in profit or a 6.4% yield.

given current interest rates, that's pretty attractive, especially to own an appreciating and readily fungible asset.

these prices may not be so crazy as they look.

you can argue about the licensing being stupid, but the pricing may not be so out of line.

 
At 3/30/2010 7:48 PM, Blogger OBloodyHell said...

> you can argue about the licensing being stupid, but the pricing may not be so out of line.

Well, DUH -- THAT is set to free market prices. It's the service that doesn't happen with, not the Danegeld to perform the service.

 
At 4/03/2010 10:13 AM, Blogger John Thacker said...

And here's the New York Times wondering why some neighborhoods get much better taxi service than others. The word "medallion" doesn't show up at all, even though one would of course expect restricted supply to focus on the most profitable areas.

 
At 6/05/2010 11:58 AM, Anonymous Anonymous said...

An entire website has popped up dedicated to taxi medallions as an investment (www.fareinvestor.com), with information on New York, Chicago, Boston and New Orleans. It looks like these markets are lucrative across the country, although New York is by far the biggest and best. A company called Medallion Financial (NASDAQ traded under the ticker "TAXI") has been around for years and specializes in lending to taxi medallion owners.

 

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