Jeepney Business

Posted by Kirhat | Friday, September 14, 2007 | | 7 comments »

Jeepney Business

Operating a jeepney business is one of the easiest to set-up, but only a few actually succeed in this venture. The only difficulty you will encounter, if you can consider this as a difficulty, is the acquisition of a franchising line and registration. Bureaucratic red-tape and the ‘lagay’ system are still prevalent in many government agencies tasked to regulate this industry.

However, it cannot be denied that many first-time investors, entrepreneurs and overseas Filipino workers (OFW) who wants to settle here for good are drawn to this business. Why? It is because you can see jeepneys everywhere. It is considered as the number one mode of transportation, although tricycle and FX taxi drivers would try to dispute this one.

To succeed in this dog-eat-dog industry, one needs to first examine if it is in their system to be patient and are not afraid to get their hands dirty in dealing with the daily operation. Also, one needs to have a basic knowledge of what are the details involved in managing this business.

Here are a couple of points I would like to raise to put this business in the proper perspective:

JEEPNEY
A common jeepney consists of a surplus diesel engine, 4th-5th gears, runs with about 10-12 MPG (miles per gallon). Jeepneys were originally American jeeps in WWII that were remodeled to accommodate 18-20 passengers and always with colorful decorations on its hood or crown. Mostly jeepneys run with open side panels or windows and passenger sits face-to-face. To ride a jeepney you can stop/call them on the road ensuring the route you're going is within the jeepneys destination and you can stop/descend by knocking on the jeeps ceiling-top or by calling on the driver. Normally minimal fare is from 1-5km from where you called them and adds a fee a kilometer after then.

JeepneyCOST AND INVESTMENT
Due to their high visibility and undeniable presence in the Filipinos daily lives, jeepney business is being considered as both a major and secondary source of income. When one tries to dip their hands into this venture, three (3) possible options are available: being an owner/operator; a driver and an owner/driver.

As an owner / operator, one has to take into consideration the following assumptions and estimates:

Cost of one unit : PhP 300,000 – PhP 350,000 (NEW)
PhP 100,000 – PhP 150,000 (SECOND HAND)

Maintenance Cost : PhP 6,000 monthly

Other Expenses : PhP 5,000.00 monthly

Boundary Payment : PhP 700.00 – PhP 1,000.00 daily

Average Operating Time : 8.00 – 10.00 hours daily

As a driver, the following calculations may be considered:

Jeepney Capacity : 10 persons per 3 kms

Cost per person : PhP 7.00 per person for the first 3 kms only

Average km runs : 100.00 kilometers per day

Boundary Fees : PhP 700.00 – PhP 1,000.00 daily

Cost of Diesel Fuel : PhP 38.00 per liter

Diesel Consumption : 4.5 kilometers per liter

If one wants to be an owner and driver at the same time, the above calculation will still hold true, but this time the boundary payment or fees will not be significant anymore.

REVENUES
It is easy to calculate the revenues of this business from the point of view of the owner/operator. It is just a simple subtraction of the cost from the profit or earnings after adjusting the time element. For instance, if you want to find out how much will earn in a month, using the high-end assumptions above, just multiply first the boundary by the number of days you plan to let the drivers operate the jeepney. If you want your jeepney to ply everyday except for 4 days a week, then that means Php 1,000.00 x 26 days (on average) = Php 26,000.00. Subtract the maintenance cost of about Php 6,000.00 and other expenses (i.e. electricity, rental) Php 5,000.00, which will leave you with Php 15,000.00. However, take note that this does not yet include the initial investment expense.

JeepneyIf we assume that you will buy a second hand jeepney for Php 150,000.00 and you got a loan from a bank that will require you to pay them P 5,000.00 monthly, including interest, then that means you only get Php 10,000.00 for each jeepney that you own. That amount would eventually increase once you have finished paying your loan from the bank, but you will also have to make sure that your maintenance expense remains within manageable levels after that since tires, parts, brake-clutch fluids and gear oils does not come cheap as your unit becomes old.

From the driver’s perspective, the monthly revenues can be calculated by first calculating profits per month. This means that a fully loaded jeepney will earn about Php 2,333.10 per day (10 persons x PhP 7.00 per 3 kms x 33.33 kms per day). The estimated 33.33 kms per day came from the assumption that passengers pay PhP 7.00 per 3 kms and a jeepney can run for at most 100 kms per day because of traffic. Hence, it follows that jeepney drivers receive payment for every 33.33 kms that they run (100 kms / 3 kms for every PhP 7.00 payment).

By subtracting the cost of boundary payment of PhP 1,000.00 and the daily diesel consumption of about Php 844.44 (100 kms / 4.5kms per liter x Php 38 per liter), the total revenue per day is equal to PhP 488.66. Multiply the daily revenue by 26 days shows that revenue per month for the jeepney driver amounts to about Php 12,705.16.

Based on the calculation above, a jeepney driver’s income depends highly on the number of persons they can get for a kilometer ride. Changing the number of passengers to less than 8 for every 3 kms will make the jeepney driver’s income less than 0. The reverse happens if the number of average passengers is increased.

PROBLEMS AND KNOWN ISSUES
Among the problems and issues encountered from operating or driving a Jeepney, the following are the most common:
  • Maintenance cost increase substantially after 3 years because the parts does not come cheap for a vehicles driven to almost exhaustion everyday.
  • Driving for 6-8 hours daily in any urban area in the country creates several health complications, such as asthma and tuberculosis.
  • Jeepneys are prone to accidents since the guidelines in the granting of professional driver’s license are not strictly enforced.
  • With their diesel engines, Jeepneys are known as the country’s biggest street polluters.
  • The brisk way jeepneys are being driven around the country to pick passengers, is one of the reasons for street overcrowding and traffic bottlenecks.
Hence, it is important to acknowledge that operating a Jeepney business is not for everyone even if the lure of high profit and easy leaving is very high. Many OFWs usually consider this type of business as one of their top options. Sadly, many Jeepney operators have sold their business after 3 to 5 years after realizing that it is not effective anymore to offset the rising maintenance and administrative cost.

7 comments

  1. Sue Wilson // February 4, 2010 at 9:33 PM  

    Thanks for this info, truly appreciate it

  2. Abigael Amor // August 31, 2010 at 10:19 AM  

    Hi, i would like to ask if we like to purchase a jeep, it is possible to own by the modes of payment is through boundary? what process should we take it to consider? thank you.

  3. Fredy Mercury of Philippines // June 11, 2013 at 1:30 AM  

    starting a jeepney business in the philippines

  4. Adam Stamour // September 15, 2015 at 4:05 AM  

    I want to live in cebu.I am thinking about this jeep taxi I was a taxi driver in ny in ny it had it better days and off days.can someone tell me where I can get a used jeepeny.

  5. Kirhat // September 15, 2015 at 7:51 AM  

    Hi Adam, there are several well-known supplier of Jeepneys in Cebu. Wheekers and Dealers is one and the price ranges between PhP100k to PhP 300k.

  6. Adam Stamour // October 25, 2015 at 5:24 PM  

    This is k ind of common sense I've seen so many beautiful Jeeps and how are they not making any money look at the stainless steel and how much money they're putting in them so I don't know where these numbers are coming up my wife's father telling me I should be able to do it runs a day at 20 pesos ahead with 18 passengers 8 runs a day

  7. Adam Stamour // October 25, 2015 at 5:36 PM  

    I am a tractor trailer driver in the United States my payments for my truck are $459 a week then I have insurance registration tags another four hundred and $50 that I pay out $3,000 a week for fuel so if I make $9,000 a week I'm basically only taking her home three to four thousand after my fuel maintenance insurance in my cost

Post a Comment