The once bitter rivals, Uber and taxi drivers, have been gradually coming together, most recently in cities like Los Angeles. The key factor that has facilitated this reconciliation is money.
For more than a decade, Uber and traditional taxi services waged a fierce battle for control over urban transportation. On one side was the time-honored practice of waving down a taxi on the street, and on the other, the innovative approach of using a smartphone app to summon a ride.
While Uber has indeed disrupted and diminished the traditional taxi industry in many cities, it has not completely eradicated it. In fact, the taxi business has shown resilience and growth, with the number of taxi drivers in the U.S. nearly tripling in recent years. Now, there are signs that the protracted and contentious conflict between Uber and taxi services is subsiding, as more taxi fleets choose to integrate with Uber’s tech-driven platform.
Los Angeles Yellow Cab, in collaboration with partner fleets, has announced a plan to list around 1,200 taxis in Uber’s app as part of a pilot program. The Los Angeles Department of Transportation has approved this pilot initiative, and taxi driver onboarding will commence in Los Angeles, San Diego, and Orange counties this week. Drivers are expected to start receiving Uber trip referrals in the coming weeks.
This move makes Los Angeles the latest city to join the likes of New York City, San Francisco, and various other major cities worldwide that have integrated their taxis into Uber’s ride-hailing app. It also signifies an unexpected alliance between taxi owners and the tech giant that once aimed to disrupt their industry.
Uber CEO Dara Khosrowshahi expressed his belief in the synergy of Uber and the taxi industry, stating, “I firmly believe that Uber and taxi are better together.” He went on to emphasize Uber’s commitment to providing taxi drivers worldwide with access to Uber trips, all while maintaining trust and collaboration with their taxi partners and drivers on a global scale.
Uber’s history of bypassing regulations and entering new markets without adhering to local rules has been a point of contention with taxi owners. Taxi industry stakeholders have accused Uber of ignoring local regulations when expanding its services. Uber has countered these claims by highlighting pre-existing issues within the taxi business, such as predatory loans.
Despite the concerns of fleet owners and driver associations, they have felt largely powerless as customers gravitated towards Uber’s platform, attracted by the convenience of electronic hailing and seamless payments. The value of taxi medallions in cities like New York and elsewhere experienced significant declines, leading to financial struggles for lenders who had previously financed the taxi industry.
Uber’s aggressive approach was evident in its rhetoric during its rise to prominence. In 2014, Uber’s co-founder and then-CEO, Travis Kalanick, described their strategy as being in a “political campaign,” with Uber as the candidate and traditional taxis as the opponent. Kalanick characterized the taxi industry unfavorably, stating, “Nobody likes him, he’s not a nice character, but he’s so woven into the political machinery and fabric that a lot of people owe him favors.” This combative language reflected Uber’s determination to challenge the established taxi industry.
Indeed, there has been a notable shift in Uber’s strategy. After realizing that it couldn’t completely eradicate the taxi business, Uber has changed its approach and is now looking to taxis to drive its next phase of growth. Uber has set a goal to list every taxi in the world on its app by 2025, and taxi owners are now eager to collaborate.
Ron Sherman, the chair and CEO of Creative Mobile Technologies (CMT), one of Uber’s partners in New York City, expressed this new collaborative spirit, stating, “We do what we do really great. Okay, and I hate to say it, but what they do is really great too.” This shift reflects a recognition by both parties that they have strengths to offer and can work together effectively.
Uber’s Taxi Business Expanding Worldwide
Uber’s taxi business is experiencing significant growth across the globe, with taxis featured in the Uber app in 33 countries. The exact number of cities and drivers involved is not disclosed by Uber. Some of the largest markets by volume for Uber’s taxi services include Hong Kong, Poland, South Korea, Sweden, and Turkey. Notably, Uber partnered with approximately 14,000 iconic yellow taxis in New York City last year.
One of Uber’s key focuses is highlighting the potential for taxi drivers to increase their earnings by accepting trip requests through the Uber app. The company anticipates that taxi drivers will earn well over $1 billion in total earnings this year. Uber takes a cut when a taxi is hailed through its app, but the exact percentage is not disclosed. As of the third quarter of this year, Uber’s average global take rate for rides stood at 28.9 percent, up from 23.5 percent in the same period in 2022.
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Uber’s expanding taxi business is transforming the way traditional taxi services operate and providing drivers with the opportunity to enhance their income.
The partnership between Uber and taxi services has proven beneficial for both parties in various ways. In San Francisco, for example, taxi drivers who accepted fares through the Uber app earned an average of $1,767 per month from Uber trips alone. This represents an almost 24 percent increase in earnings compared to drivers who did not accept Uber trips, according to Q2 data from the San Francisco Municipal Transportation Agency. For taxi drivers participating in the pilot program, nearly a quarter of their monthly revenue came from third-party referrals like Uber.
Uber’s collaboration with taxi services has taken different forms in various regions. In South Korea, Uber established a joint venture with SK Telecom to compete in the country’s high-value mobility market. In Hong Kong, where the taxi market is significant, Uber acquired the city’s leading e-hail app, HKTaxi, to list more taxi drivers in its app. These strategies have allowed Uber to tap into local markets and expand its services by collaborating with established taxi providers.
Uber’s Expansion Utilizes Technology to Connect Taxi Services
Uber’s expansion of its taxi services is driven by technology, as the company’s engineering team developed an API (Application Programming Interface) to facilitate seamless connections between taxi technology providers and Uber customers. Through this API, individuals using the Uber app to hail a ride can be matched with the nearest taxi, and fares are presented upfront, similar to Uber trips. Notably, taxi drivers who receive trip requests through Uber are compensated at the same rate as Uber drivers.
While the API was initially created to enable taxis connected to New York City’s licensed technology providers, Curb and Arro, to receive trip requests from Uber, it is now being utilized globally. Taxi owners worldwide are using this API to connect their drivers with Uber customers. Sachin Kansal, Uber’s Vice President for Product, emphasized the importance of the API in facilitating this expansion and integration of traditional taxi services into the Uber ecosystem.
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Uber is continuing to expand its taxi services worldwide, with different features and integration depending on the city. In some cities, riders will have a standalone feature to request a metered taxi, while in others, taxis are included among the available vehicles when using UberX, the company’s primary ride-hailing product.
According to Sachin Kansal, Head of Mobility Products at Uber, “There is enough demand to go around,” and the company aims to continue building its core technology to bring every taxi in the world onto the Uber platform. Kansal, a former executive at San Francisco-based app-based taxi operator Flywheel, has utilized his knowledge of the taxi industry to drive this initiative and integrate various fleets and proprietary technology into Uber’s platform.
Dara Khosrowshahi, CEO of Uber, praised Kansal’s experience in the taxi industry and the team’s dedication to solving problems with technology, which has resulted in a cutting-edge integration benefiting both riders and drivers.
Uber’s Evolving Strategies in the Taxi Industry
Uber’s strategies in the taxi industry have evolved significantly over the years. Before the COVID-19 pandemic, Uber was striving to achieve profitability. It employed a model that used venture capital funds and other investments to subsidize fares and undercut the traditional taxi industry, resulting in significant market disruption. In New York City, this impact was particularly pronounced, with hundreds of drivers filing for bankruptcy and a tragic toll of driver suicides.
Despite Uber’s efforts to gain dominance, taxis continued to thrive in both the United States and international markets. To counter this, Uber started listing traditional cabs in its app, aiming to increase supply, attract new customers, and salvage its business in key markets.
When the pandemic struck, both the ride-hailing and taxi businesses saw a sharp decline in demand. As lockdowns eased, Uber faced challenges in recruiting enough drivers to meet customer needs, leading the company to allocate hundreds of millions of dollars toward driver bonuses and incentives to address the driver shortage.
Uber’s strategies have continually adapted to navigate the complex landscape of the ride-hailing and taxi industries, shaped by changing consumer behavior and external factors such as the pandemic.
Uber’s Partnership with Taxis Sparks Optimism in the Taxi Industry
Uber’s recent collaboration with taxi operators has started to show promising results, with drivers in multiple markets reporting increased earnings after accepting trip referrals from Uber. This partnership has led some industry experts to predict a potential resurgence in the taxi industry, which has faced challenges such as low wages, high loan costs, and fierce competition.
Many experienced rideshare drivers are now considering becoming licensed taxi drivers due to this partnership. They recognize that by working with Uber, they can tap into both the rideshare and taxi businesses, potentially boosting their income.
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Despite concerns about Uber’s labor practices and reluctance to raise driver wages or classify them as employees, taxi operators are drawn to the partnership because of the financial benefits. Uber incurs substantial costs related to insurance and liability, and by shifting a portion of its trips to taxi drivers, it can reduce these costs while increasing its revenue. Uber recently reported its first operating profit in nearly 14 years of service, and maintaining profitability while expanding its supply is a priority for the company. Taxi owners believe that this partnership benefits taxi drivers, offering them access to Uber’s advanced technology and a potential boost in income.
Ultimately, the prospect of increased earnings seems to outweigh other concerns for both drivers and taxi companies involved in these collaborations. As one expert put it, when people can make money, the source of the trip becomes less significant.
