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The Jeepney Business

A lot of foreigners who come to live in the Philippines are always looking for is a
business where they can make enough money so that they can live here. A lot of
people who move here do not have regular streams of income at their disposal, and
dont have a lot of savings built up that they can live from. One of the businesses a
lot of people talk about is the Jeepney business.
Although the business of owning a fleet of Jeepnies is kind of romanticized by many
foreigners, it is a really tough business. Especially in todays world of very high
gasoline (or diesel) prices, its hard to make much money from Jeepneys, in my
opinion. If you consider how much the Jeepney fare was at the time I moved here in
2000, it has increased, but not nearly at the rate that fuel has increased.
The business model for most people who have enough money to buy a few Jeepnies
is that they buy the Jeepnies and then they rent them out to drivers. The drivers
then collect a fare from each passenger who rides that day, and whatever he makes
over the rental that he paid, thats his profit for the day. Maintenance costs of the
vehicle are for the Jeepney owner to take care of. If the Jeepney is not running,
there will be no money for rental that day!
I have not heard for a few years, but last I heard, the driver would pay around P800
per day for rental of the Jeepney. By the time that all of the costs are deducted, it
honestly doesnt leave that much for the owner. Lets see what kind of costs
would be involved?
Cost of the Jeepney maybe $10,000 or so.
Depreciation of the Jeepney these things are treated pretty roughly.
Repair and Maintenance Costs everything from Oil Changes to Engine Repairs
Cost in time Your time is worth money, and you will spend time chasing down
people to drive, etc.
All in all, I personally dont believe that there is a lot of money to be made in this
business. It would seem that the record bears me out too, because most foreigners
who get into this type of business end up going out of business within a year or so,
from what Ive seen.
A couple other things to consider on this the locals dont really like having a
foreigner get into this particular business. They will give you strong competition to
drive you out of business. Secondly, you cant just buy a Jeepney and go out and
start driving around picking up passengers. You must get approved by the
government to run on a certain route. You cannot change to a different route one
day just because there are no passengers you must follow the route that you are
assigned. Also, they wont give everybody a route. If all the routes already have
the maximum amount of Jeepnies, you are out of luck!
So, maybe its a better idea to search out a different business. Of course, your
mileage may vary!

Jeepney Business
Posted by Kirhat | Friday, September 14, 2007 | Jeep | 7 comments

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.
COST 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.
If 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 drivers 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 drivers 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 drivers 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
drivers license are not strictly enforced.

With their diesel engines, Jeepneys are known as the countrys 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.