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Uberisation – the future of the industry or a passing fancy?

Mention Uber to taxi drivers and you’ll generally get polar opposite reactions, it’s either love or loathe. Taxi operators, on the other hand, seem to be firmly in the against camp.

Uber has certainly disrupted the industry, not only with what could be called ‘aggressive driver recruitment’ through £500 to £800 sign-up inducements, but also the heavily subsidised rides for new customers using the service.

Taxi operators, large and small, have been left counting the costs, with reduced driver numbers leading to longer waits for customers, both loyal and new. It could be said the traditional taxi operation needed a shake-up, but is it a level playing field?

Taxi drivers traditionally pay a weekly rent to their operator to receive work, then collect the fare directly from each passenger. With Uber, however, drivers receive a weekly payment for each job they complete. Perhaps the attraction lies in not having to budget collected fares to ensure the operator rental is covered. In contrast though, Uber takes up to 25% commission from all fares – maybe it is a case of what you don’t see you don’t miss?

The service delivered by Uber is largely similar to that of the traditional taxi operator. The vehicles are the same mixture of colours, models and varying ages, the only noticeable difference is, where the XYZ Taxis sticker would sit on the door, an Uber sticker can now be found.

So from a passenger perspective, what is not to like? Discounts abound and once signed-up there’s no worrying about having enough cash to pay the fare, it’s automatically charged to your credit card. Just remember to check your bill – it can be surprising how much you can spend when it is all charged to plastic and there is the surge pricing during peak times to consider.

For a global business that was founded less than eight years ago (2009), Uber is one of the fastest growing companies in the world, with its 2016 valuation said to be around $69B. However, as a private-owned business, Uber has been reluctant to talk about its financials, although it is rumoured to have lost $2B in 2015 and $3B in 2016, raising questions on how long any business can continue to lose money at that level.

Transport industry expert Hubert Horan’s recent analysis suggests Uber passengers are only paying 41% of the actual costs of each trip, the rest being funded from the billions pumped into the operator by investors. Is Uber using subsidies to undercut rivals and ultimately achieve a monopoly?

Those drivers joining the Uber ranks may ultimately help it achieve this overwhelming dominance but, in doing so, could be making themselves redundant as the taxi industry changes forever. Just as Google, a former Uber backer, is pioneering the development of autonomous cars, Uber has set its sights on driverless cars for the future.

So is Uber a global dominance here to stay, or just a passing distraction? I’ll pre-book my taxi for tomorrow morning while you think about that – at least you can’t do that with Uber, yet.

 

LandFlight director, Danny Matthews

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