The appearance of UBER on the market in 2009 caused an unexpected turbulence in the transportation industry. The controversial startup wiped out a huge percentage of the taxis’ market share worldwide, reaching a mind-blowing revenue of 6.5 billion dollars, and a 68-billion-dollar evaluation. But despite the groundbreaking success, UBER’s aggressive tactics spiked a lot of controversy among taxi drivers, and they reacted accordingly. But what exactly made the company’s business model so questionable, and is the aggressiveness in their market penetration going to backfire?
So, what exactly is UBER?
For those who are not familiar with the company, UBER is a location-based app that allows you to hire private taxi drivers from your smartphone and watch their route in real time. The company provides inexpensive car rides for customers, and makes it easy for anyone to become a self-employed driver and earn additional money by only meeting a few requirements.
UBER driver vs. TAXI driver – requirements
One of the biggest issues surrounding the startup’s controversy is the fact that becoming an UBER driver is not associated with the same requirements as becoming a taxi driver. While the startup only asks for some basic and non-financial requirements, in many countries, taxi drivers have to pay thousands of dollars in order to obtain their license, so it is not a surprise that they haven’t been happy with the easy entrance of the competition.
Let’s take a quick glance at the prices associated with obtaining a taxi driver license in some countries vs. the price associated with obtaining an UBER license driver.
Note: the price is approximate. The taxi driver license refers to the cost of buying the license from a driver who is retiring, because many countries aren’t issuing new ones anymore. It means that the taxi plates are usually auctioned in closed bids, meaning that some of them can reach mind-blowing costs.
USA (New York)
|up to $ 600, 000||$ 0|
up to $ 153, 000
|up to $ 375, 000||$ 0|
|Italy (Rome)||up to $ 140, 000||$ 0|
|Turkey (Istanbul)||up to $ 625, 000||$ 0|
|Canada (Vancouver)||up to $ 842, 000||$ 0|
|France (Paris)||up to $ 270, 000||$ 0|
Since UBER only requires a regular driving license which a driver with 3+ experience (one of the companies’ requirements) usually already has, there are only prices associated with insurances and a couple of taxes (which is not included here, since we are only talking about a special driving license).
With these impressive prices for buying a taxi plate in comparison to the lack of any special licenses for UBER, it is no surprise that taxi drivers are protesting against the startup operating on the market. The little costs required to become a private UBER driver impact negatively the taxi sector by allowing many people to easily start driving for additional money without having to buy expensive taxi plates. As a result, the accelerated growth of the number of UBER drivers is taking a huge share of the urban transportation industry.
Since the appearance of the company, people have been ditching the taxi riders for an UBER ride with the speed of the light. Besides the comfort and the speed that the app provides for placing orders, and the experience that many clients are just delighted of, one of the main reasons for preferring this transportation method is undoubtedly the price.
The startup calculates the fare between two destinations in advance, and the client already knows how much he is going to pay even before getting into the car. Besides, the comfort of not having to bring any cash with you because you are paying via mobile is a huge factor to having a great experience.
While in some countries or cities the prices are not that aggressive as in others, they are still usually lower than taxis’. Let’s take a look at these tables (Source: Business Insider), where the first one compares prices in 21 US cities excluding the taxi tip, and the second one calculates the tips as well.
UBER was banned in many countries
With the low costs for becoming an UBER driver, and the aggressive prices that are wiping out a huge share of the taxi industry, it is no surprise that the company is running into trouble. And, luckily for taxi drivers, many countries are concerned about the controversial business model of the company, and many of them have banned UBER from operating on their territory.
Some of them include:
Bulgaria – where the startup was accused of “unfair trade practices” because it is not registered as a taxi service and doesn’t meet the minimum requirements of legislation;
Belgium – where the company was threatened with fines for offering fares to drivers that don’t posses a taxi license;
Italy – the company was banned in April stating that UBER’s practices “constituted unfair competition”;
Brazil – banned in 2015 as a response to the complaints of the taxi drivers’ union;
Finland – UBER drivers are facing criminal prosecution in the Nordic country;
France – the arrival of the startup in France caused numerous strikes and protests in the country, leading to a ban in 2016, and fines summing up to more than 800,000 EUR.
Hungary – the government passed a legislation suspending the services of the transportation startup, blocking internet access to “illegal dispatcher services”.
Among these countries were many others that either banned UBER, limited its services, or forced the company to become compatible with the corresponding laws – such as Germany, the Netherlands, India, Malaysia, Indonesia, New Zealand, Canada, Norway, the Philippines, etc.
Are the days of the $68-billion-valued startup counted?
Despite the outstanding success of the transportation startup, UBER is facing significant troubles trying to compete with the established laws in many countries all around the world. Ever since its creation, the company has been involved in more than 173 lawsuits, and has suffered millions of dollars worth in fines. Additionally, being banned from operating in so many countries is not helping UBER to continue its market expansion with the same acceleration as before. According to CNN Tech, UBER is burning cash at an incredible rate, losing more than 2.8 million dollars in 2016.
Nonetheless, no matter if the company is losing revenue or is still growing as it claims to be, the business model that made it the highest-valued transportation technology company in the world is losing a lot of ground. If UBER wants to continue operating, it will either have to adapt to the local governments, or develop a service or a product that is compatible with their laws and requirements.
For now, the impressive startup is still operating and fighting with a variety of lawsuits, and the time will show whether it is going to find a way to adapt and survive, or it will lose the battle.