The taxi industry

You’re running late for work or just too lazy to get the bus to your friend’s house and the only alternative is to jump in a taxi and pay three or four times the price of a bus ride. With Uber making waves in the ride sharing industry, how have taxis been affected?

Uber, offering users a cheaper and more practical service has left a hefty dent in the taxi industry. In Sydney, the cost of taxi plates has fallen by over half since Uber entered the industry. Selling on average at around $400,000 dollars in 2012, prices have plummeted to $200,000 as taxis become less and less popular. In New York, it’s the same story. Taxi licences called “medallions” were selling for US$1.32 million but by 2016, prices had headed south and were now being bought for US$600,000. The same happened in major cities across the US including Boston and Chicago.

What is behind the drop in popularity? Uber offer a cheaper service. No matter the country they undercut what a taxi driver charges. With low barriers to entry, Uber drivers can sign up and begin ferrying passengers with minimal cost, just needing a car that is capable of clocking up plenty of kilometres on the road. This allows Uber drivers to charge cheaper prices while the app helps minimise their time spent searching for the next ride.

For users, the benefits are obvious. Ordering a pick up on an app eliminates the need to wait outside while it’s almost guaranteed that the fare will be cheaper. As well as this, ride sharing companies regularly offer incentives to use their products, reducing the price and increasing use.

In major cities around the world taxi drivers have mounted protests about their loss in earnings. However, one prominent study looking at the income of taxi drivers in the US found that the impact of companies such as Uber and Lyft had a minimal effect on the money they could earn. The study found that taxi drivers incomes dropped on average by 10 percent, but it resulted in an increase in 50% of self-employed drivers in the city.

In many cities, taxi prices are extremely high and don’t represent value for money for many consumers. Getting public transport has always been the only cheaper option, however ride sharing apps have disrupted the industry and look likely to stay for the long haul.