Black mood: London taxi drivers protest against the Uber app © AFP/Getty Images

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Taxi apps are causing disruption to a decades-old market. The likes of Uber, Lyft and Hailo, have made it easier than ever for taxi drivers to find nearby fares. These online services are used by thousands of eager passengers, who can call up a driver at the touch of a smartphone screen.

Depending on what facilities are available in each country, these services are also often cheap. Billions of dollars in venture capital are being poured into taxi app start ups, allowing them to engage in price cuts in the battle to attract passengers.

In the face of sudden and intense competition, established taxi groups scream foul play, claiming the taxi apps are often skirting decades-old regulations on who can be hired for fares.

But the one group essential to the industry — the drivers — seem unsure what to make of the maelstrom. “You can’t go to other companies because Uber has taken most of the business,” says one disgruntled minicab driver in London, who asked not to be named for fear of repercussions. “The industry of cabbing has turned upside down because of Uber. Drivers were told they would make more money and have an easier life. But they show you one hand and slap you with the other.”

But a French Uber driver, a young man of Arab origins, says he loves driving for the San-Francisco- based service. He says that at a time of high youth unemployment, Uber created the opportunity to make extra money from taxi fares, in between part time jobs.

During another recent ride, a London-based Uber driver misunderstood why I was asking a torrent of questions about working for the service, leading him both to recommend driving for the taxi app company and offering to help me become an Uber driver.

Travis Kalanick, chief executive of Uber, says the company is a force for good, creating hundreds of thousands of jobs by opening up the cabbing industry to people who had been shut out by monopolistic taxi incumbents.

But he also concedes it can be “quite tricky” to find a “middle ground” that balances the interests of drivers and passengers, as Uber experiments with new pricing and services. “In many cases it’s good for one side and bad for the other,” he says.

Mirroring legal challenges elsewhere in the world, this year Britain’s GMB Union, which represents thousands of professional drivers, sued Uber over allegations that the ride-hailing service does not provide basic worker rights, such as ensuring people are being paid the minimum wage or for holiday.

They also accused Uber of failing to adhere to health and safety standards, such as making sure drivers take breaks or work no more than a certain number of hours. In July, Steve Garelick, branch secretary of GMB’s professional drivers’ branch, said it had been approached “by various [Uber] drivers who were not happy with their lot in life”. The action is ongoing.

Uber says: “One of the main reasons drivers use Uber is because they love being their own boss. As employees, drivers would drive set shifts, earn a fixed hourly wage, and lose the ability to drive elsewhere, as well as the personal flexibility they most value. The reality is that drivers use Uber on their own terms: they control their use of the app”.

The main issue appears to be low fares. When the likes of Uber and Lyft introduced heavy price cuts for passengers, they protected drivers’ income, saying the taxi app group would pick up the difference. However, the companies gradually began reinstating their own share at the expense of drivers.

Mr Kalanick has argued that lower fares lead to more frequent rides. So, overall, drivers’ income rises. But not all are convinced. The disgruntled London driver claimed that he had to work longer hours to make up the difference.

“If you’re earning £10,000 a year and they suddenly take away 15 per cent to give more discount, how would you feel?” he asks. “You’re using your own car, your own fuel, and paying your own taxes. You work out how much a driver is left with.”

Some believe that, in time, Uber and other taxi app groups will have to end their price wars. Karhoo, a new taxi comparison app due to launch next year, aims to provide users with access to thousands of cars run by established operators — including London’s black cab drivers. The 10-month-old company has raised $250m, and aims to raise more than $1bn to fund its global rollout.

Daniel Ishag, Karhoo’s chief executive, says his app will allow the established taxi companies it works with to set prices, taking a small cut from every sale. He believes the business model will work because: “[Uber] can’t subsidise prices forever; they have to be profitable, especially if they want to IPO.”

Copyright The Financial Times Limited 2017. All rights reserved.
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