Taxis are considered one of the symbols of urban transportation systems due to their large daily traveling mileage. Taking into account hatchback cars with two rows of seats, this paper presents a new approach to taxi efficiency by decreasing the vehicle size. The policy’s influences on fuel consumption, emission, safety, and economic efficiency are comprehensively analyzed. With supplementary surveys of taxi passengers, a total of 1110 taxi trips are observed at nine busy locations. The results show that the trunk is not used in 88% of taxi trips in Hangzhou. It is estimated that downsizing each taxi results in annual decreases in fuel consumption by 1600 L, CO by 311.9 kg, HC by 15.4 kg, and NOx by 8.9 kg. By using a small car as a taxi instead of a standard car, the annual fixed cost plus the fuel cost will be reduced by 38%. By analyzing GPS data of 7081 taxis in Hangzhou, we found a network-wide average taxi speed of 23 km/h. Since the average speed of taxis is relatively low in urban areas, the use of small cars could provide drivers with higher maneuver capability, while increasing the safety of small cars. According to the findings of this paper, using small cars will increase the efficiency and sustainability of the taxi industry.
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