Austin has become home to a host of new ride-sharing firms
Could a decision by Uber and Lyft to pull out of the Texas capital backfire?
By A.W. | WASHINGTON, DC
UBER has a name to live up to, and as a fellow Gulliver recently noted, it seems to be doing so. In the first quarter of this year, Uber and Lyft, combined to account for 46% of business trips taken on the ground in America, versus just 14% for traditional taxis. Looking just at cabs and other ride-hailing services (and excluding hired private cars), Uber serves 69% of business trips, compared with 4% for Lyft. Given that some think the economics of ride-hailing apps favour monopolisation—since big services have more cars and therefore better coverage and shorter waits, in turn making them more attractive to customers—we predicted that “the odds must be on business travellers living in an Uber-only world a few years hence.”
Perhaps. But there is one city where the opposite trend is taking place, and it serves as a useful counterpoint in imagining what the future might hold if Uber isn’t able to solidify its grasp on the market.
That city is Austin. Uber and Lyft recently played a game of chicken with the capital of Texas. When the city proposed tighter regulations on their services, the two firms threatened to pull out and launched a costly campaign to persuade voters to back them in a referendum. Alas, their pleas fell on deaf ears and the people sided with the politicians. So last month, in order to save face, and to discourage other towns from taking similar measures, Uber and Lyft suspended their services.
It seemed like a terrible outcome both for the companies involved and for a tech-obsessed city that is dependent on cars (but also enjoys an ample nightlife that makes driving a poor idea). Yet in the absence of Uber and Lyft, the market has behaved exactly as economists would predict when demand hasn’t changed but the supply has suddenly vanished: a slew of new firms have appeared.
As CityLab has documented, at least half a dozen startups have emerged in the month since the big ride-hailing apps’ departure. Some function similarly to their predecessors. Others offer certain advantages, or at least variations. And demand for these services has been two-sided. There are approximately 10,000 former Uber and Lyft drivers in Austin; each can choose which app is best for him. One service that is proving popular, for example, is Arcade City, which allows those behind the wheel to vet prospective passengers via their Facebook pages. Where drivers go, fares follow. More than 32,000 customers have also signed up.
Not all of these startups will survive, of course. It is not even clear that some are legal. But Austin offers a suggestion of what the future might hold if more places challenge Uber and Lyft over their resistance to the laws and rules that govern traditional cabs, such as background checks for drivers. The firms’ effort to save face by pulling out of Austin might backfire if cities see that they can stand up to them without ushering in a future devoid of ride-hailing services. Particularly if a handful of these competitors are able to spread beyond the Texas capital.
It is still possible that Uber and Lyft will reach an accord with Austin and swoop back in, dashing the brief hopes of these upstart rivals. But while Uber was the first big player in the ride-hailing-app world, that doesn’t necessarily mean it is the best. And if Austin does augur a more pluralistic future for the ride-hailing business in America, travellers could end up with more choices, not fewer. And that, as any economist would tell you, is usually good for consumers.
