The Great Scandinavian Entrepreneurial Venture

After arriving to Helisinki from Riga Latvia at 130am I was greeted with an interesting surprise outside of the terminal while dragging my bags behind me. I even tried to deny myself the pleasure, and take Dr. Myhr’s advice to ride the bus to the central station and take a taxi from there, however the last bus left at 1am; I was just 30 minutes too late! I got back in line for a taxi, hoping I would get into a new 2012 S class Mercedes that was a couple of cars behind the one that I rode in above. Yes every single taxi in line was a new Mercedes, most of them white, and none that were over 2 years old. I just couldn’t believe it, how could every taxi be such a nice car, wasn’t Sweden and Finland the land of 50% income tax and VAT!?

Well after I first jumped into the car I quickly realized one possible reason why the cars were so nice. A 20km (12 mile) ride from the airport to hotel would set me back 40euro ($50). Still this couldn’t be the whole reason. Maybe the taxi company was supported by the Italian-German mafia!? I think not, so during the conversation with my driver I asked him point blank; why are all the taxi’s so nice? I told him in the US no matter what cab company you are most likely to get into a smell 10+ year old cop car that still has scratches on the window from felons the police picked up and were taking to the station.

Peeta, the driver, explained to me that in Finland (also goes for Sweden while we are on the topic) a car that sells for 50,000 euro such as this one at the end of the transaction will set back the buyer a total of 85,000euro, due to taxes and government charges. I thought that this was ridiculous; no wonder why hardly anybody else has a Mercedes on the road. Peeta then explained to me that when you own a taxi company; when you purchase a car you do not have to pay the taxes or government charges; meaning a 50keuro car only costs 50k euro! Make sense to me! After complimenting him on how well kept up it was I asked him why all of the cars were so new?

Peeta mentioned to me that yes the taxi business was a great business to be in, I reconfirmed with him that it better be since I was paying him so much for a 10 minute ride! However the real money to be made in the taxi business is in selling the car after 2 years. After the 2nd anniversary of the date you purchased a car, you do not have to pay sales tax on a car, and the buyer does not have to pay taxes on purchasing the car or government charges. This 50,000 euro car would be sold for roughly 60-65k euro. 10,000 euro more than what the price of the car was new!

Moral of the story: If you want to be in business in either Sweden or Finland. I would recommend the taxi business. You get a beautiful new Mercedes for a large initial investment. You make serious money giving riders a lift from the airport to their hotel ; and two years later you get to sell the car for more money than you purchased it for! I believe that a great entrepreneurial venture awaits the Chapman MBA program in the Scandinavian taxi business.

Jonathan Ruffalo, Luisa Valera, Ebrahim “The Great”

 

Comments

  1. Great insight into the taxi business.