Israel's Shared Taxi Service Collapses Amid Failed Reform

Shared taxis, once a ubiquitous and vital part of urban transportation in Tel Aviv and the Gush Dan area, have all but disappeared. These large yellow vehicles, identifiable by numbers 4 and 5 on their signs, offered a swift and convenient way to travel along main routes, stopping for passengers and operating during hours when public transport was limited, including weekends. However, in recent years, their numbers have drastically declined. A November 2024 State Comptroller report revealed a staggering 93% drop in shared taxis nationwide, from 844 in 2017 to just 59 in 2023. This collapse occurred despite a 2018 reform aiming to increase their numbers to 2,500.

The reform, intended to regulate the industry, has been widely deemed a failure. The process began in 2005 with an amendment to traffic regulations, but the temporary arrangement was repeatedly extended. The State Comptroller had warned in 2016 that the Ministry of Transport had failed to implement a comprehensive regulation, instead relying on repeated extensions of the temporary order, which harmed competition and fair business practices. "When your agreement is extended each time, and the field is not regulated, you don't buy new equipment but wait to see what happens in the long term," explained Meital Lehavi, Deputy Mayor of Tel Aviv-Yafo for Transportation. "The deterioration in the industry began then."

In 2016, a government decision mandated that licenses for shared taxi routes be awarded through competitive tenders. The 2018 amendment to the traffic ordinance formalized this, aiming for approximately 110 routes across 23 clusters nationwide. However, the tender process was plagued with delays and issues. By January 2020, only one cluster with two routes was operational, despite tenders being completed for ten clusters. Many winners withdrew or struggled to prepare, and the old operating licenses were repeatedly extended until their expiration on December 31, 2021, leaving many drivers operating illegally. The Comptroller concluded the reform failed to expand the service and the transition to new operators was disorganized.

Industry insiders criticize the tender system for prioritizing low bids over operational viability. Uri David Hai, CEO of Odelia Taxis, highlighted a route from Petah Tikva to Tel Aviv where the bid price was 6 shekels, significantly lower than the 16.5 shekel list price, making it impossible to operate profitably given rising fuel, insurance, and maintenance costs. "How can you operate a service line at this price?" he questioned, noting that his company is operating at a significant loss out of commitment to passengers, especially those with limited means.

Further challenges include a lack of oversight on the number of taxis actually deployed by companies and the impact of the COVID-19 pandemic, which exacerbated financial difficulties. A 2022 initiative to allow local authorities to plan new routes was also stalled due to legal questions. The disappearance of shared taxis has left a void, particularly in Tel Aviv, impacting nightlife and reducing mobility options, especially during off-peak hours and weekends. "The state dries up social services financially, publicly delegitimizes them, and then closes or privatizes them," summarized Sivan Shmuelovitz. "This method is destructive and harms the public twice."