Why taxis can never compete with Uber (via The Week)

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Why taxis can never compete with Uber (via The Week)

By Gregory Ferenstein

In a few short years, ride-sharing companies have dominated their taxi competitors. In San Francisco alone, Uber reportedly earnsmore than three times the entire taxi market ($500 million vs. $140 million). And recently, Uber’s main competitor, Lyft, announced that it has raised a whopping $500 million, at a $2.5 billion valuation.

Anyway you slice it, investors think that ride-sharing is going to be worth many times more than the entire cab industry. More importantly, new research from Uber’s data science team reveals why taxis may never be able to compete with their Silicon Valley rivals.

The longer Uber exists in a city, the less patient consumers become. “In some cities, if users see the nearest Uber is more than even 2-3 minutes away, they are far less likely to request a car, while in other cities wait times as long as 10 minutes are perfectly acceptable,” the team wrote.

In other words, Uber is making consumers impatient.

In San Francisco, one study found that just 16 percent of taxis arrived in less than 10 minutes after being called, while 90 percent of ride-sharing cars did. (To be sure, the taxi industry is suffering huge losses in San Francisco.) This is a structural problem with taxis. Unions purposefully limit the numbers of cars on the road to keep drivers’ wages artificially inflated.

To read the full article, click here.



Posted on

March 30, 2015