Ride sharing vs Taxis showdown continues

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Ride sharing services and taxi companies continue to square off. Image from Wikimedia Commons.

Ride sharing services and taxi companies continue to square off. Image from Wikimedia Commons.

Ride sharing, a recent phenomenon where people voluntarily offer people rides in their own cars for a fee, is a huge point of contention with traditional taxi services and metropolitan governments. The legality is somewhat in question, but what’s at stake is the revenues associated with taxi cabs.

Ride sharing beefs entirely about the money

The difference between “ride sharing” services like Uber or Lyft and a taxi is thus: taxicabs are vehicles licensed and solely used to ferry passengers, but ride sharing is a voluntary use of one’s own personal vehicle for a fee. You sign up to be a driver, and people who need a ride pick you from a smartphone app. They then give you a “donation” for the ride.

Taxicabs require licensure for the vehicle itself, often called a “medallion,” from the city in which the cab operates. They are prohibitively expensive and thus often controlled by corporate entities.

Ride sharing doesn’t, which pisses off taxi companies, taxi drivers and city governments worldwide, which are losing control. That’s why so many cities, such as Portland, New York and San Francisco, are up in arms over ride sharing – it chaps the ass of the already wealthy.

Some get the goldmine

If capitalism actually existed in America, ride sharing wouldn’t be a problem.

The medallion system works by cities throttling the number of medallions available. Each one is good forever; they transfer among vehicles. New York has barely issued any since the Great Depression, and there are fewer extant cabs today than when Babe Ruth was playing. Other large cities, such as Chicago or Boston, barely issue new ones either. San Francisco has only 1600.

Due to the scarcity, existing medallions are often bought or leased by investors or cab companies. Then come vehicles and drivers.

Medallion owners and cab companies, according to PriceEconomics, charge rent for using the car – not unlike stage fees for dancers that are “putting themselves through college” – and other administrative fees, which is where cab companies make their money. Casual investors, according to Slate, average a 5 percent ROI – a $1 million medallion, which isn’t uncommon, thus generates $50,000 in dividends.

In other words, taxis are very lucrative for those who can afford to buy the medallions.

Some get the shaft

Believe it or not, ride sharing is better for drivers. Cab drivers often start their shift more than $100 in the hole for rent. In New York, average daily income for a cabbie is about $96. Drivers pay for their own gas, and since the medallion is leased to them, they are classified as “independent contractors,” which means no benefits and fewer rights as employees.

Thus, taxis are not lucrative for those who drive them.

The medallion system also leads drivers, according to BusinessWeek, to quit when they’ve hit an acceptable daily minimum. Each person is different, but once you’ve made a decent enough profit after rent…why keep chasing fares?

Seasoned professional drivers can earn much more money through ride sharing via Lyft, InstantCab, Sidecar or Uber. InstantCab reported that of ten anonymous drivers they tracked data for (three professionals, seven amateurs), professional drivers made at least $1,000 more. One out-earned the highest earning amateur by more than $2,000. Unlike traditional taxi driving, they also make money the second they hit the road. One cabbie now driving for Uber after years in a regular taxi reported a 20 percent bump to BusinessWeek.

Consumers, though, don’t benefit from the one consumer protection involved in taxis – fixed rates. Cities fix rates for cabs, whereas ride sharing companies charge higher rates for peak times. Non-peak hours, though, are much cheaper. There is also much more chance involved, since anyone can basically sign up, which has lead to some tragedies.

Part of the issue is the clash of 21st century technology with 20th century corporatism. How are the old guard to compete? Can they at all? Hopefully not; the medallion system is muscle for the bosses and frankly, the bosses can hang.

One thing is certain – the system as such is on the way out.

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