TapRun Consulting

Support Traditional Taxis: Use Uber

by Adam Juda on Monday, September 19, 2016

The traditional taxicab industry is in trouble. Upstarts like Uber are using legally questionable tactics to upend the transportation industry and capture a large segment of the market.

Mired in regulation and unable to evolve, taxi companies have no idea what can be done to stop Uber's encroachment.

Not only do I have a solution, but I have begun to fight for the taxi industry myself. How do I do this?

I use Uber.

That's right. Every time I use Uber, I do my part to end its tyranny on the marketplace and restore taxis to their previous position.

Let's take a look at the facts. Uber is often touted as a multi-billion dollar company. It is - but only if you look at the venture capital it has accepted. If you look at actual profitability, it's actually performing quite poorly. In the past quarter, it lost more than 100 million dollars in the US alone. If we look at the first two quarters, we'd see that the firm has lost well over a billion dollars world-wide. [Note to investors: my single-person consultancy is more profitable than this billion dollar company.]

There are many reasons for this, not the least of which is the fact that trips are subsidized by the company. That fact suggests that the more people who use the service, the more quickly Uber will go bankrupt. It doesn't take a PhD in finance to realize that this is not a strategy to ensure long-term business success.

Not only that, but municipalities are making each ride hurt a little too. Massachusetts recently decided to start taxing Uber and use the proceeds to fund traditional taxis.

While it's difficult to obtain a good feel for what Uber drivers are paid, rumor has it that they're not exactly swimming in cash. My tiny addition to the service's demand is going to increase the rate of vehicle depreciation being experienced by drivers and force them to absorb the costs of expensive vehicle repairs sooner. The realization that the drivers are not earning much and subject to costly repairs will cause drivers to leave Uber's workforce more quickly. As the number of drivers decreases, the availability of drivers will necessarily decrease, forcing Uber to subsidize the service to an even greater extent and eat away at its enormous multi-billion dollar war chest.

I say to taxi services everywhere: stop trying to go head-to-head against the mighty Uber. The best way for you to succeed is to promote your competitor to the best of your abilities. Every time a rider chooses your competitor over you, you become that much closer to winning the marketplace.