October 5, 2022

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Business News for March 24, 2022

When Uber arrived in New York City in 2011, yellow taxis ruled the streets and drivers paid $1 million for the coveted taxi medallions that gave them the right to pick up passengers.

Undeterred, Uber worked relentlessly to lure riders away, deriding the taxi industry as inefficient, corrupt, greedy and even a “cartel.” The taxi industry, in turn, accused the company of bringing economic ruin to its drivers.

Now, the once-bitter rivals, who have battled for years for control of the city’s streets, are striking an unlikely alliance: Uber will team up with two taxi companies, Curb and CMT, to allow New Yorkers to order a yellow taxi on the Uber app, the companies said Thursday.

The announcement — the first large-scale agreement of its kind in the U.S. — comes at a time when riders are increasingly embracing apps to order both Ubers and taxis. The companies are struggling to recover from a pandemic that has battered the ride-hailing industry as people have worked from home and tourists have stayed away.

“On the one hand, Uber and yellow cab seem completely like water and oil,” said Bruce Schaller, a former city transportation official. “On the other hand, when you go hail a cab or go to your smartphone to get an Uber, it will be the same experience as it was before. So it’s kind of like a big change and the same thing all at once.”

Starting later this spring, riders will be able to open the Uber app and choose a taxi. Uber will then refer the request to the two taxi technology companies, which will notify drivers to pick up the passengers. The fare will be based on Uber’s pricing and policies, including surge pricing, which can significantly increase the cost at peak times.

The app will display an upfront price, as with all Uber rides, before the rider requests the trip. Riders will pay roughly the same price for a yellow taxi as they would for a standard individual Uber ride, known as UberX, the company said.

Yellow cabdrivers who respond to Uber app hails will also see a ride’s pricing upfront and under the deal will have the option to accept or reject it. Under city regulations, ehail taxis — unlike street-hail taxis—- do have the right to refuse fares.

Though Uber has clashed with taxi groups for years as it has attempted to take over markets around the world, it has discovered that partnering with taxi companies instead of fighting them can turbocharge its business, especially overseas. Partnerships with taxi fleets and technology companies in other countries allow Uber riders to order taxis on the app, as will be the case in New York.

Those agreements, combined with the New York partnership, “would seem to reflect a new page or a new stance in Uber being willing to work more closely with the industry that it was once trying to disrupt,” said Tom White, a senior research analyst with the financial firm D.A. Davidson.

Being “a little more friendly” with taxi companies could help Uber “curry favor and smooth Uber’s relationships with legislators and policymakers” in those cities, he added.

Uber said it had integrated with more than 2,500 taxis in Spain, partnered with the taxi service TaxExpress in Colombia, acquired the local HK Taxi app in Hong Kong last year, begun a partnership with SK Telecom in South Korea and also worked with taxis in other countries, including Germany, Austria and Turkey.

Uber’s new partnership with the taxi industry in New York, which was first reported by The Wall Street Journal, will generate more revenue for the company since it receives a fee on every ride ordered through its app.

At Uber’s investor day in February, Andrew Macdonald, Uber’s senior vice president of mobility and business operations, said the company wanted every taxi in the world on its platform by 2025.

Mr. Macdonald said adding taxis was about money: When Uber offers more modes of transportation, the company found, customers often use several of those methods, “spend more and are more loyal.”

Muhammad Rahman, 37, who has driven a taxi in New York for eight years, said he hoped an Uber connection would bring more fares in neighborhoods where street-hails are uncommon. “Uber customers are everywhere,” he said.

But another taxi driver, Helmer Monroy, 67, was more skeptical. “I don’t think Uber is going to help the yellow cab industry,” he said. “They didn’t destroy the industry — but they damaged it.”

Antonio Cruz, 50, a Brooklyn resident who drives for Uber two days a week, said he was concerned that the new Uber-taxi partnership could mean more competition from yellow cabs, especially on the days when he works in Manhattan. “We could lose business,” he said.

Before the pandemic, taxi drivers in New York were losing fares to Uber’s and Lyft’s ride-app services and facing financial ruin after taking out loans to buy medallions at inflated prices.

Uber has faced its own challenges during the pandemic. Early on, with demand for rides plummeting and drivers worried about contracting the coronavirus, many left the platform.

As the U.S. economy rebounded and cities relaxed restrictions, customers returned but found that drivers had not come back in the same numbers, leading to drastically higher fares and long wait times for trips.

Both companies last year acknowledged that they were struggling to attract enough drivers to keep up with demand, but said more recently that the problem is easing. Uber said the number of drivers on its platform was at its highest level since February 2020.

Still, many drivers remain unhappy about how much money they make, and some said they were driving less or not at all since high gas prices began eating into their earnings. Adding thousands of taxi drivers could help offset other driver departures.

The new Uber-taxi partnership in New York did not require the approval of the city’s Taxi and Limousine Commission, which oversees taxis and for-hire vehicles, including Ubers, city officials said.

“We are always interested in innovative tools that can expand economic opportunities for taxi drivers,” said the agency’s acting commissioner, Ryan Wanttaja. “We are excited about any proposal to more easily connect passengers with taxis and look forward to learning more about this agreement between Uber and the taxi apps and ensuring it complies with TLC rules.”

New Yorkers will still be able to wave down yellow taxis in the street or order them through two taxi apps, Curb and Arro, which offer upfront pricing as with Uber rides.

The city’s 13,587 yellow taxis are equipped with technology systems from Curb or Creative Mobile Technologies, which operates the Arro app.

Curb, which has more than two million users in New York City, has seen a spike in demand during the past year of the pandemic. Average daily rides by individual consumers have soared to more than 15,000 rides citywide from about 2,000 rides in 2019, according to Amos Tamam, Curb’s chief executive officer.

“Taxis came back on the consumer’s radar,” said Mr. Tamam, adding that the partnership with Uber could lead to a “substantial increase” in rides for taxi drivers.

When a rider requests a yellow taxi through the Uber app, both Uber and the taxi company will receive fees from the rides. Taxi drivers will continue to be paid through the Curb and CMT systems.

It is hard to say how the deal will affect passengers and drivers, in part because trip costs and driver payments are controlled by algorithms that vary depending on the app, the length and distance of a trip, the time of day riders request cars and other factors.

In some cases, riders may pay more for a taxi they order through the Uber app than for one they hail on the street, but not always. Similarly, drivers may sometimes, but not always, receive more for a metered trip than a trip ordered through the Uber app. Uber said it would be providing more details about the taxi option in the coming months.

Bhairavi Desai, the head of the Taxi Workers Alliance, a group that represents cabdrivers, said she believed that drivers accepting trips from the Uber app would earn less than if they picked someone up off the street and took them to the same place.

She urged drivers to negotiate better fares from Uber, noting that the agreement was struck “at a moment when the companies need this deal more than the drivers do” because Uber is “hemorrhaging drivers.”

“We’re going to seize it as an opportunity to negotiate proper terms for the drivers,” she said.

Others expressed more optimism.

Mr. Schaller said that if the new system was implemented properly, following existing regulations, it should benefit both drivers and customers.

“I’ve always expected there would eventually be a convergence of yellow cabs and ride-hail apps, Mr. Schaller added, “but I wouldn’t have predicted 2022 if you asked me in 2019.”

Brian Rosenthal contributed reporting.