Why not let everyone who qualifies swim in the taxicab business leaving those who cannot stand the waters perish?
1) Do you really want two-ton land missiles driven by desperate people who are driven to cut corners to stay competitive?
2) More generally, as you noted, a competitive market is a swim-or-sink situation. That means profit margins will get razor-thin. That sounds awesome until you realize that wages are also a form of profits. In other words, a competitive market is good for customers and horrible for everyone else in it. This is the reason why people have so much debt: the entire economy has become a "competitive market" where those participating in it - employees - barely survive, no matter how much it produces. So of course anyone who can tries to use whatever leverage they can to make any markets they're competing in less efficient. It's the only way to avoid starving.