Will Madrid be next?
Less than a year has passed since Uber returned to Barcelona, after a three-year leave of absence. But it’s already planning to leave the city again in the wake of renewed conflict with the city’s highly mobilized taxi drivers as well as the passage of unfriendly regulation.
Late last week the Catalan regional government unveiled legislation that would force customers to request the services of ride-sharing firms 15 minutes before travelling. It wasn’t enough to placate the taxi representatives, who wanted the period to be extended to between 12 and 24 hours. Donned in yellow vests reminiscent of recent anti-government protests in Paris, they called a strike on Friday and hundreds of taxis occupied Gran Via, one of Barcelona’s two busiest thoroughfares, bringing traffic to a standstill.
In retaliation hundreds of Uber and Cabify vehicles occupied a key section of the city’s other main artery, Avenida Diagonal, resulting in three days of gridlock.
On Tuesday representatives of Uber and its Spanish rival Cabify announced they were considering abandoning Spain’s second largest city after Catalonia’s regional government unveiled legislation that would force clients of ride-hailing services to book their vehicle an hour in advance, which would essentially negate the whole point of operating a ride-hailing service in the region. Some are calling it a de facto eviction.
At 4 a.m. today, the taxi drivers voted to accept the regional government’s proposal to force customers to book ride-share services an hour in advance.
Even more worrisome for Uber and Cabify, Madrid taxi drivers are also on strike and are calling for a similar clampdown as the one proposed in Barcelona. On Wednesday the striking taxi drivers targeted Madrid’s annual international tourism fair, one of the biggest in Europe, as hundreds of them parked their cars outside the conference center where the event was taking place, hampering the arrival of participants.
If the City’s authorities capitulate, thousands of Uber and Cabify jobs could be on the line. Representatives of both firms have made it clear they will seek damages for their drivers and any lost business. In Barcelona alone, the total bill for compensation, including interest, could reach as high as €1.2 billion according to a study by Ernst&Young. It’s a bill that will inevitably be picked up by Spanish taxpayers.
In Spain the central government has given regional and local authorities carte blanche to set legislation for ride-hailing vehicles. Barcelona has long been unfriendly territory for the likes of Uber and Cabify. Uber’s three-year absence from the city was triggered by regulatory issues as well as the hostile welcome it received from local taxi associations.
If Uber thought its return to Barcelona in April 2018 would be less fraught, those hopes were quickly dashed when dozens of advertisements announcing its return with the words were defaced by taxi drivers. Alberto ‘Tito’ Álvarez, spokesperson of the taxi Elite Taxi Barcelona, delivered a stark message to the company: “Uber and Cabify drivers, welcome to hell!.”
But Uber would not be deterred. With its huge tourist influx and potential for business, Barcelona was a highly coveted market. When it announced its return to the city last April, the company tried to strike a more conciliatory approach by meeting with representatives of Catalonia’s regional government, parliamentary groups, competition regulators and also with the Barcelona City Council.
But Barcelona’s taxi drivers were not mollified. Last July, at the very peak of the city’s high tourist season, they called a week-long strike 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.
By Spanish law there is supposed to be a maximum of just one ride-hailing vehicle for every 30 taxis on the road licenses but in many places that number is much higher. In Barcelona the ratio of taxi licenses to VTC licenses, the permits that enable ride-hailing vehicles to circulate, is 4.8 to 1 while in Madrid it is just 2.4 to one. In Spain as a whole there are 66,000 taxi licences compared to 13,000 VTC licenses, according to the Ministry of Trade and Industry.
Spanish authorities have clearly not been abiding by their own rules. Due to loopholes in Spanish law, companies have managed to rack up indecently large profits by buying up batches of VTC permits from local councils for as little as €32 a piece and then selling them on in the secondary market for tens of thousands of euros. In Madrid VTC licenses can sell for as much as €65,000 each.
Taxi driver associations complain that the ride-sharing vehicles flout the law in other ways, including by fishing for customers in the street without being formally hailed. There’s also frustration at how Uber and Cabify are able to operate under less onerous regulations, while also paying little, if anything, in taxes. Arguably the biggest competitive advantage rideshare giants like Uber enjoy over local taxi firms is their ability to burn through cash at a blistering rate. With deep-pocketed investors eager to subsidize each and every ride, Uber can operate well below cost by offering customers rates that taxi companies have zero hope of being able to match. By Don Quijones.