The Economic Impact of Ride-Hailing Apps on the Taxi Industry
Imagine strolling the bustling streets of a metropolitan city and needing to travel to different places. Aside from subways, you have two options: hail a taxi, or use your phone to book an Uber/Lyft. Undoubtedly, many people would choose the latter. With just a click away, transportation network companies (TNCs) like Uber and Lyft have skyrocketed in popularity, providing consumers with an affordable and convenient way to get around to places. Unfortunately, these services have also had a negative impact on the traditional taxi industry, leading to a loss of jobs, and increasing the risk of monopolies in the transportation industry.
TNCs’ Impacts on the Taxi Industry
One of the most significant effects of this increasing popularity of TNCs has been the loss of jobs in the taxi industry. The harsh state of the taxi industry in NYC is exemplified in an article by the New York Times, which stated that “The price of a taxi medallion has plummeted, many drivers have abandoned cabs for ride-hailing services and taxis sit idle in garages” (Fitzsimmons & Hu, 2017). In an effort to stay in business, taxi owners who haven’t switched to ride-sharing apps have been significantly lowering their prices to compete against multimillion-dollar companies like Uber and Lyft. This results in a lack of profit and further puts taxi drivers in debt.
Drivers have been especially struggling during the COVID-19 pandemic, at a time when demand for trips significantly decreased. While many other businesses are slowly bouncing back from the effects of the pandemic, the same can’t be said about the taxi industry. In the month of June of 2022, there was an average of 5,490 taxis in NYC daily, which seems significantly small compared to the whopping average of 49,341 ride-sharing vehicles in the same month.
Why Do More People Prefer Ride-Hailing Apps Over Taxis?
If a business gains millions of users within a few years, there must be innovative resources that the business offers. TNCs have the ability to offer a variety of vehicles to consumers, ranging from affordable to luxury cars. Taxis, on the other hand, have more constricted options and don’t allow consumers to choose different features (Baraza, 2021). Taxis generally have more traditional ways of receiving customers by relying on people hailing them in person and only taking cash payments (“Future of the Taxi Industry,” n.d.). As technology progresses, more people desire convenience and feel as though using taxis requires extra effort. Because companies like Uber emerge with technologically advanced features like tracking drivers and providing upfront fares, more people, especially the younger generations, are inclined to choose these options.
What the Future Has In-store for The Taxi Industry
If anything, this bleak situation for the taxi industry can serve as a reminder to businesses that people seek change and innovation. Looking into the future, there are many resources that taxi companies can use to overcome their lack of consumers. One such way is utilizing technology that competitors like Uber and Lyft have already been implementing. Taxi firms need to implement technologically advanced features to increase revenue and stay competitive in the transportation market.
Perhaps the most important way for taxi firms to utilize technology is to implement apps. Utilizing apps will put more emphasis on consumers and their growing needs. In these apps, consumers can choose to pay taxi drivers online and will also have the ability to communicate with drivers. These services can be made easier by the usage of Fleet Management Systems, which are IT solutions that companies can use to track the locations of taxi drivers, optimize fuel consumption, and improve the safety of drivers and passengers (“Taxi fleet management system,” n.d.).
Another potential solution for taxi firms is to partner with TNCs. This has recently been in effect with the pilot program in San Francisco which helped taxis in San Francisco establish a partnership with Uber. Through this partnership, consumers were introduced to the idea of booking taxis through the Uber app. The San Francisco Municipal Transportation Agency, which helped launch this pilot program, intends to increase the competitiveness of taxis by taking advantage of the upfront fare feature that Uber offers taxis (Said, 2022). While there are reasons to be optimistic about this program, it’s important to acknowledge growing concerns about the monopolization of Uber in the ride-hailing industry. If Uber does become the platform that many taxi drivers use to receive customers, Uber might have more control over operations and limit growth opportunities for taxi firms.
Conclusion
The taxi industry has helped many metropolitan cities thrive, and to see it deteriorating is truly heartbreaking for many. There needs to be more coverage of the devastating job losses that countless taxi drivers are facing, and policymakers should keep TNC companies in check to prevent the formation of monopolies. Fortunately, new solutions that many taxi firms are implementing offer the possibility of a bright future for the taxi industry.
Works Cited
Baraza, G. (2021). Assessing the Impact of Uber on the United States Taxi Industry. Benedictine University. https://www.proquest.com/openview/084b0119f4777e84b1396b0a6f682899/1?pq-origsite=gscholar&cbl=18750&diss=y
Said, C. (2022, November 9). Your next Uber ride could be in a San Francisco taxicab. San Francisco Chronicle. Retrieved April 28, 2023, from https://www.sfchronicle.com/sf/article/Your-next-Uber-ride-could-be-in-a-San-Francisco-17572772.php
Taxi fleet management system. (n.d.). iSKY.SOLUTIONS. Retrieved April 27, 2023, from https://isky.solutions/en/taxi
What is the future of the taxi industry? (n.d.). Delamere Motors. Retrieved April 27, 2023, from https://delamere-motors.co.uk/blog/future-taxi-industry/
