If you've never heard of Uber, it's a ride sharing, taxi service with drivers using their own cars to transport consumers much like a taxi would. But it's going to transform the taxi industry.
The service has evolved from a smartphone app, allowing users to book transport to wherever they want to go. Payment is booked to the customers' credit card or Pay Pal account, with no actual money changing hands. No tips are required either.
Both drivers and their passengers rate each other after the trip – allowing both to build a profile much like Ebay buyers and sellers.
The big selling points include:
- Uber is much cheaper than a taxi.
- You can watch the Uber car on its way to you (some Australian taxi companies's apps can also do this now)
- Your destination is usually shown on the Uber map, often on a smartphone prominently displayed in front of the driver, including directions.
- When you hire an Uber, you can choose which one based on distance to you or rating.
- A seamless payment experience using your credit card or PayPal, and no tip.
However, as you might expect, there has been significant opposition to Uber around the world, including in Australia. Ride-sharing is illegal in many countries and Uber wants governments to change that rule. Under threat taxi companies also claim the service is illegal and unsafe. In Queensland alone, fines for ride-sharing have cost Uber drivers more than $1.7 million for the 12 months to end of June 2015. Providing a taxi service without a licence can mean fines of up to $1,366.
Uber is reported to have paid the fines on behalf of its drivers.
The company, for its part, says it has transformed poor suburbs, with more than 45% of jobs created coming from suburbs with high rates of unemployment. As time goes by, more and more workers are freelancing, providing a highly mobile and flexible workforce that can move to where demand is greatest. The popularity and growth of companies like Freelancer Ltd (ASX: FLN), AirBnb and AirTasker and the services they offer are attributable to those moves.
You can see the attraction of driving for Uber. You don't need a taxi, or a taxi licence to drive an Uber – it's your car and you have the freedom and choice of how much or how little work you do.
But one of the biggest issues is that Uber is unlicensed – lower costs is one advantage over the taxi industry, allowing the company to provide a much cheaper service.
Unlike many Australian taxis, Uber is also not dependent on Cabcharge Australia Limited's (ASX: CAB) payment processing – which can add another 10% in fees to the fare cost.
Reports suggest the company has hired 15,000 drivers already since launching in Australia in April 2014, and wants to have 20,000 by the end of 2015. The Australian Taxi Industry Association (ATIA) says the number of drivers has remained static since Uber's arrival, at 68,000. That suggests Uber hasn't had the impact many expected.
So far that is.
News.com.au reports that Uber is targeting the most popular taxi hire times of Friday and Saturday nights and taxi drivers that only work those shifts have seen significant competition and 'significant hardship' according to ATRIA CEO Blair Davies.
When a new technology or disruptive business model comes along, it usually takes some time before the effects are felt. Taxi drivers may continue to struggle through, slowly dropping off in numbers, until it reaches a tipping point ending in a mass exodus from the industry.
Foolish takeaway
If you haven't tried Uber, you might want to give it a go, given the advantages it has over normal taxi services. I'm all in favour of more efficient industries and it seems the taxi industry was crying out for evolutionary changes.
