Uber vs Taxi

In the September, 2015 edition of The Walrus, an article by Jonathan Kay appeared, entitled: 'Uber v Taxi: One must die for the other to live.' In a thoughtful, well-researched piece, Kay concluded, after exhaustive interviews with those involved, including Mayor Tory, as well as a brief stint driving for Uber, that the two could not co-exist. Four years have elapsed, and, contrary to Monsieur Kay's claim, the two continue to provide service. It begs the question, for how much longer? Uber's success lies in the fact it substantially undercuts the true cost of providing service, notwithstanding use of surge pricing during peak periods. This has cost the company dearly from a financial standpoint. According to the Toronto Star's, David Olive, Uber has consumed $34 billion of shareholder capital since going public earlier this year - its share value plummeting 41%. Should new investment capital dry up, Uber will be left with two choices; namely, cease offering discounted fares, or fold its proverbial tent. No company can bleed that amount of money indefinitely. Not even Uber. Though battered and bruised by Uber's presence, with plate values and rentals a tiny fraction of what they were prior to Uber's entry; though earnings have been similarly impacted, thanks, in large part to some 90,000 Uber drivers in the Toronto area alone, the taxi industry continues to stay afloat, albeit treading serious water in the process. One wonders for how much longer? When gasoline-powered cabs were initially introduced into the North American market by entrepreneur, Harry N. Allen, in 1907 - Allen having started the New York City Taxi Company as a response to overpriced horse-drawn cabs - it didn't take long for the traditional service, around since the days of Charles II, to fade to black. With Henry Ford's introduction of the assembly line the following year, significantly reducing the cost of his iconic Model T car, Allen's company expanded from an initial fleet of 65 to over 700. A ground transportation mainstay for centuries, the hackney carriage was relegated to the sidelines, content to operate as a short-lived tourist attraction before being consigned to the dustbin of history by the exponential growth of Big Auto. Affordable cars transformed the transportation landscape completely. Billions were spent building an infrastructure that could accommodate what quickly became the American, (and Canadian), dream. Will either Uber or Taxi go the same extinction route, as Jonathan Kay suggested? Arguably, both groups are determined to stay the course, fighting tooth and nail for market share. That said, something has to give. Notwithstanding the fact Uber has generated new business, experience over the years dictates that a cap on the number of licensed vehicles is imperative if a balance between prompt service and the opportunity to earn a reasonable living is to be achieved. As for introducing a much-needed cap, our political masters have shown no enthusiasm whatsoever for doing so, leading to a veritable glut of Uber operators. For Uber to survive, its business plan depends on several key factors. First and foremost, a constant supply of new capital to staunch the hemorrhaging. Secondly, access to an unlimited number of drivers. Thirdly, the right to regard their drivers as independent contractors, as opposed to employees. Fourthly, the continued opportunity to remain self-regulated. To date, local governments have capitulated completely to Uber's demands, naturally, in return for a piece of the action.....a classic example of quid pro quo. That said, tenacity and intense lobbying will get Uber only so far. Eventually, the house of cards upon which this corporate pariah is built will collapse. As to when, only the Shadow knows. In conclusion, Jonathan Kay was right. Uber and Taxi cannot co-exist, at least not indefinitely.

Peter Pellier


December 2019