A Dublin taxi firm has said it will put 2,000 new Mercedes-Benz taxis on the streets over the next two years. The cars will be supplied at "less than half the normal price" under a joint venture agreement with a new "virtual" company called E-taxi. City Cabs, which currently operates a 450-cab service, is to buy the 2,000 new taxis from E-taxi, which will operate a text message communication system between the taxis and prospective customers. An order for 1,000 cars has already been placed.

E-taxi is selling the cars, normally retailing at between £40,000 and £45,000 (#50,789#57,138), at a much reduced rate. It plans to use revenue from advertisements carried on the taxis and revenue from the in-car sales of Ready-to-go cards - and the topping up of pre-paid phones through credit card terminals - to make up the difference.

Customers seeking to contact City Cabs will be able to text message E-taxi, which will then locate the nearest free taxi and trigger a call between the driver's phone and that of the customer. The company plans to operate this service using computer technology and without the use of employees. The technology has been developed by a company called Bellstream.

Mr Colin Hayes, managing director of E-taxi and owner of Bellstream, said E-taxi hopes to sell Mercedes cars and its technology service to other Irish taxi companies. In time it may start to sell, through agents, to individual taxi plate owners. The cars are to be owned and operated by the taxi-owners, but will carry the E-taxi brand as well as that of the taxi operator.

Mr Noel Ebbs, managing director of Noel Ebbs Taxis Ltd, trading as City Cabs, said he hopes to put 2,000 or more new Mercedes taxis on the streets of Dublin over the coming two years. There are approximately 6,500 taxis in the city overall at present.

Not all of the 2,000 new taxis would end up operating under the City Cabs banner, Mr Ebbs said, but he hoped most of them would.

The directors of E-taxi are Mr Hayes, owner of Cellular Connection and applications developer, Bellstream; Mr Simon Lunt, formerly of Riverdeep; and Mr David Quirke, of the Dublin restaurant Nude.