Uber in Waterloo Region

[ookpik]

I think a lot of taxi drivers here don't own their taxis (and I understand that this varies depending on the city).

As I understand it they rent cars from the taxi company for something like $100/day. They're also responsible for gas. They pay for that out of fares. I don't know if they keep all of their fare income or have to pay the taxicos a commission as well.

A Star article I posted a couple of pages ago says Uber drivers get about 75% to 80% of the fare revenue Uber collects on their behalf. Uber doesn't collect tips. I don't know if drivers make anything from tips on the side.

I would think that it would be cheaper for a taxi driver to provide their own car for Uber than pay $100/day to the taxicos. Covering that initial $100 every days seems tough. It's the first several fares. That's why I wonder why taxi drivers aren't switching in droves. But it's also likely I don't understand the numbers (or the politics) well enough.

Incidentally Uber has been accused of sharp, perhaps even illegal, business practices in thwarting competing online services like Lyft. If they're willing to do that then why wouldn't they reduce the commissions they pay to bona fide taxi drivers in order to steal them from taxicos?

[ookpik]

Some insights into the economics of driving for Uber compared to driving for a conventional taxi company. If these numbers are at all accurate then why aren't taxi drivers defecting in droves?

How Uber is ending the dirty dealings behind Toronto's cab business

The problems created by the plate system were mind-boggling. At least 30 per cent of the industry’s revenues went to people who did nothing but milk income from their licenses...

My [Uber] fare was automatically charged to my credit card through the app. David carries no cash. Uber takes a 20 per cent cut, and pays David the rest. He can work whenever he wants simply by declaring himself available through the app. In a good week, he nets $1,000...

Like almost every other [taxi] driver in the city, he didn’t own his car. Instead, he rented one for $80 per day. This was for a 12-hour day shift. Another driver rented the car at night for $90.

A large chunk of these rental charges go toward leasing the Toronto cab plate attached to the car. The Diamond driver had two hours left in his 12-hour shift. I asked him how much he had grossed for the day.  He pulled it up on his meter: $109.

He had to pay $80 for the day rental, plus fuel. By the end of the day, he estimated, he would net between $20 and $40.

[tomh009]

$109 plus probably some tips at 10 hours -- say $130 + $20 in tips for $150 total at the end of the shift. $80 for car rental, say $20 for gas to end up with $50.

The Uber driver with the same number of rides might only earn $75, less 20% for $60 net. $20 for gas, and he ends up with $40, and he still has to pay for a car.

Clearly for Uber to work for the driver, he has to be able to get substantially more rides than a taxi driver, so the effectiveness of the Uber app is the key there. An oversupply of drivers won't force prices down but it'll reduce average driver earnings so that will likely reduce the diver population in the longer run.

[ookpik]

$109 plus probably some tips at 10 hours -- say $130 + $20 in tips for $150 total at the end of the shift. $80 for car rental, say $20 for gas to end up with $50.

The Uber driver with the same number of rides might only earn $75, less 20% for $60 net.  $20 for gas, and he ends up with $40, and he still has to pay for a car.

It depends on how typical the $1,000/week ($200/day) that the Uber driver reported is in practice. He said that was a good week so maybe $100/day is more typical. Presumably that would be net of Uber's 20% commission, but it's not clear. Both Uber and regular taxi driver have to pay for gas.

The taxi driver, even with tips, ends up with about half of that. But of course the Uber driver has to pay for his car.

Two important differences between the two models.

1. The taxi driver has to ante up $80+ per day even if he gets no fares. He's also at the mercy of the dispatcher who could make bad days happen. Uber counts that their driver is already paying for his car for his own personal use. If Uber's insurance covers the driver when he's working then his only extra cost is gas when the Uber app has fed him a fare.

2. Tips. The taxi driver gets an unspecified income stream from tips. Uber doesn't collect tips. Do any passengers tip with cash? Is there any chance that Uber might introduce an optional tip amount in the app so that tips could be paid by credit card?

Clearly for Uber to work for the driver, he has to be able to get substantially more rides than a taxi driver, so the effectiveness of the Uber app is the key there.  An oversupply of drivers won't force prices down but it'll reduce average driver earnings so that will likely reduce the diver population in the longer run.

The current taxi model limits supply by way of taxi plates. That keeps taxi fares high, keeps the plate owners rich and forces drivers to economize, perhaps cut corners. (This is similar to the various dairy and poultry marketing boards that limit supply and keep prices high. The license owner wins. The consumer loses. The difference is that farmers generally own their "plates" and do their own work while the taxi owners hire slave labour to do all the real work.)

The Uber model will balance supply and demand. Prices will come down until it's no longer feasible to be an Uber driver. Quality will be self-policed by way of the ratings system as well as by changes in regulations. The consumer will benefit in the long run.

Interesting times.

[Markster]

2. Tips. The taxi driver gets an unspecified income stream from tips. Uber doesn't collect tips. Do any passengers tip with cash? Is there any chance that Uber might introduce an optional tip amount in the app so that tips could be paid by credit card?

There is no tipping with Uber.  

It is very unlikely that this will ever change. It is a key selling point.  It would go also against the Randian beliefs of the company to allow it; drivers are paid for the service they do, and those who do not provide good service are penalized through low ratings causing fewer fares.

[mpd618]

Lyft, on the other hand, does allow tipping. Maybe they will expand here once Uber has battled the regulations sufficiently.

[Markster]

And...

GO!

Uber launches service in Waterloo Region, Guelph, Hamilton, London today

Uber announced it is launching its UberX ride-sharing service in Waterloo Region, Hamilton, Guelph and London Thursday, according to a release from the company.

Customers in the southwestern Ontario cities will be able to order UberX cars using their smartphones starting at 2:00 p.m. today.

[panamaniac]

I wonder if bylaw enforcement will be checking it out? I imagine there will be a bit of a delay before action (if any) is taken.

[tomh009]

I can't see that bylaw enforcement would realistically have any resources to check this out.

So how big an issue is this for the local medallion owners? I can't imagine that the medallion prices would be at anywhere near the Toronto levels.

[BuildingScout]

I can't see that bylaw enforcement would realistically have any resources to check this out.

So how big an issue is this for the local medallion owners? I can't imagine that the medallion prices would be at anywhere near the Toronto levels.

Why not? it's a matter of supply and demand, not city size. So in principle if demand was sufficiently tight they could well be more expensive than Toronto. I have no idea if they are, I'm just saying that a priori there is no reason to think they are lower/higher than Toronto without knowing how scarce they are.

[tomh009]

Point taken, and yet I still imagine that they are less valuable than in Toronto.

Edit: It seems that the region does not significantly limit taxi licences, at least in the view of taxi companies:
http://www.therecord.com/news-story/2619...-licences/

In Toronto, taxi plates are still selling for $100K or so, although far less than before.

[ookpik]

Something the CBC article above didn't mention: Uber expands to southwest Ontario, offers free rides 

Uber Canada says its uberX service will be available in London, Waterloo Region, Hamilton and Guelph, and customers can ride up to four times for free until Sunday.

[BuildingScout]

Point taken, and yet I still imagine that they are less valuable than in Toronto.

...and you would be wrong:

Today one of just 332 taxi licences available in Waterloo Region can sell for about $300,000, said Pete Neufeld, president of the Waterloo Region Taxi Association.

Taken from The Record, January 16, 2015.

[plam]

I can't see that bylaw enforcement would realistically have any resources to check this out.

So how big an issue is this for the local medallion owners? I can't imagine that the medallion prices would be at anywhere near the Toronto levels.

Why not? it's a matter of supply and demand, not city size. So in principle if demand was sufficiently tight they could well be more expensive than Toronto. I have no idea if they are, I'm just saying that a priori there is no reason to think they are lower/higher than Toronto without knowing how scarce they are.

While that's true, things generally cost less here than in Toronto.

Turns out that the Region of Waterloo tries to maintain 1:1650 ratio of taxis licenses to residents: http://www.regionofwaterloo.ca/en/doingB...xiCabs.pdf

Also, there is a study that explores the factors contributing to the number of licensed taxis in various jurisdictions. That study, interestingly, found that the population of a region did not affect the number of taxis there. The factors that did contribute were: # of subway commuters; # of no-vehicle households; and # of travelers exiting the airports.

http://www.nctr.usf.edu/jpt/pdf/JPT%208-...haller.pdf

[tomh009]

Point taken, and yet I still imagine that they are less valuable than in Toronto.

...and you would be wrong:

Today one of just 332 taxi licences available in Waterloo Region can sell for about $300,000, said Pete Neufeld, president of the Waterloo Region Taxi Association.

Taken from The Record, January 16, 1015.

But that information is at least a thousand years old!