The competitive advantage rideshare giants have over local taxi firms is their ability to burn cash, as investors eagerly subsidize each ride.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
A fresh flash point has broken out between Uber and the highly mobilized taxi drivers of one of its most febrile markets, Barcelona, the capital of Catalonia. A two-day taxi driver strike this week, called to protest against the number of rideshare vehicles on the streets and failure to enforce national regulations that are supposed to limit private hire vehicle numbers, turned ugly on Wednesday as protesters attacked rideshare vehicles.
It’s the latest escalation in a turf war that dates back to 2015, when Uber first arrived in Barcelona. The message from the 2,000 protesting taxi drivers, some of whom had converged on Barcelona from other Spanish cities, was clear: Uber and other app-based rideshare companies such as the Spanish firm Cabify are destroying the taxi industry with impunity. And these taxi drivers will not surrender without a fight.
In Spain the central government and market regulators are largely lined up in the rideshare firms’ favor. The spark for the latest round of protests was a decision by Spain’s Ministry of Public Works to block attempts by Barcelona’s City Council to ensure a previously agreed ratio of 30 taxi licenses for every authorized ride-hailing car is honored. The current ratio in Catalonia stands at 6.7 to 1.
Many Spanish taxi drivers are incensed at how the established national ratio, designed to limit the number of rideshare vehicles, is not being upheld. The rideshare giants have been buying up licenses from other operators to ramp up their presence. There’s also frustration at how rideshare firms are able to operate more cheaply and under less onerous regulations, while also paying little, if anything, in taxes.
Uber and Cabify vehicles — endearingly termed “cockroaches” by local taxi drivers for their black color — were the main target of yesterday’s violence, which eventually led to a temporary suspension of all rideshare services in the city, including Cabify and Uber.
Uber has been back on the streets of Barcelona for just four months following three years of absence due to regulatory issues as well as the hostile welcome it received from local taxi associations. If events in the last 48 hours are any indication, that reception is likely to grow even less friendly in the months to come.
Besides vandalizing Uber and Cabify cars, the protesting taxi drivers also brought traffic on Barcelona’s main orbital road to a standstill. They even threatened to block key city infrastructure controlled by the Ministry of Public Works, such as the port or airport, if the government refused to unblock Barcelona City Council’s anti-Uber legislation.
“We demand an immediate commitment that translates into real action in the next few days. Otherwise, we will bring the country to a standstill,” Alberto Alvarez, spokesperson for Barcelona’s biggest taxi driver association Elite Taxi, said on Wednesday. On Thursday afternoon, the Ministry of Public Works appeared to blink by announcing that it would lift its suspension, although the final decision now rests with Spanish courts.
Elite Taxi has been a thorn in Uber’s side for some time. Last year, the taxi drivers’ association took Uber to the European Court of Justice (ECJ) over its Peer-to-Peer service UberPop, which hooked up nonprofessional, unlicensed drivers with riders. It was a David versus Goliath case, and it was David who came out on top. Not only did the ECJ rule in the taxi firm’s favor but it also declared that Uber was a transportation business, not just a technology platform.
Uber has faced legal challenges in myriad locations across Europe. It was temporarily banned from operating in London last year after being accused of a string of failures over passenger safety. It was also banned from operating in Denmark, Hungary, and Buglaria. France, the Netherlands, and Finland have also banned UberPop at some point over the last five years.
In 2017 Uber was banned in Italy after a Rome court ruled that it represents unfair competition for traditional taxis. Taxi drivers complained that it has an unfair advantage because, unlike normal taxi drivers, its drivers can purchase licenses in small towns where they cost less, and use them to work in cities.
The biggest competitive advantage rideshare giants like Uber and Lyft have over the local taxi firms resides in their ability to burn cash at a blistering rate, where investors eagerly subsidize each ride. Taxi companies have a hard time competing with these investor-subsidized prices because they cannot afford those kinds of losses if they want to stay in business.
Many local authorities are still not sold on the benefits of letting a handful of cash-guzzling Silicon Valley giants wipe out taxi firms that pay through their nose for licenses, taxes, social security, and insurance, and by and large follow domestic laws and regulations, only to replace them with a global oligopoly that pays virtually no taxes and only follows regulations when it suits them.
As recent events in Barcelona and other cities have shown, many taxi drivers are prepared to fight tooth and nail to keep their livelihood in tact. But in doing so, they risk alienating the very people they need on their side — their customers. By Don Quijones.