|Iqbal bought his medallion for $570,000 in 2009 and needed to earn about $5,000 a month to break even on insurance, the medallion mortgage and industry fees alone. The Queens, New York-based driver earned extra income by leasing his car to a second driver who worked the day shift.
“This was an investment in the long term,” Iqbal said at the time. Despite those challenges, the 48-year-old said he wanted to make his NYC medallion work. “It would help me raise my family, take care of the kids, pay the rent and later on, work as my retirement.”
“We need something for app hailing with yellow cabs, to have even arms with Uber,” he went on. “Then, I can compete with them.”
As of today, it turns out he may not have to.
This morning, Uber made a sizable shift in its business strategy that has faced opposition from traditional taxi services since its founding in 2009, announcing that it reached an agreement to list New York City taxis on its app.
Two taxi-hailing apps, operated by Curb and Creative Mobile Technologies, will integrate their software with Uber, allowing users to book taxi rides in the Uber app later this spring. (It’s worth noting that taxis are already available in other countries via the Uber app, including Spain, Germany and South Korea.)
“This is a real win for drivers – no longer do they have to worry about finding a fare during off peak times or getting a street hail back to Manhattan when in the outer boroughs,” said Guy Peterson, Uber’s director of business development, in a statement. “And this is a real win for riders who will now have access to thousands of yellow taxis in the Uber app.”
The deal comes as Uber, Lyft and other ride-hailing disruptors grapple with a shortage of drivers. After a dramatic decline in traveling due to the pandemic, ride-hailing companies have struggled to bring drivers back to full speed, which has made rides more expensive.
But several weeks ago, Uber said mobility demand has improved “significantly” through February, with trips back to 90% compared with its February 2019 figures.
Uber has also said figures have continued to improve when it comes to attracting and retaining new drivers, but as indicated by today’s move, there’s still room to grow. CEO Dara Khosrowshahi said as much last month when he teased plans to bring more taxis onto the Uber app, even beyond New York City.
“I will tell you we want to get every single taxi in the world onto our platform by 2025,” Khosrowshahi said in an interview with CNBC’s Andrew Ross Sorkin.
At their peak, the cost of many cab rides skyrocketed at the same time Uber was experiencing torrential growth — much of which was responsible for the company sitting atop 2016’s Disruptor 50 list, just a year after the value of yellow taxi medallions began to significantly decline.
Today, the company is preparing for its strongest travel season yet. Uber said airport gross bookings by the end of February were up over 50% month on month.
Still the broader concern remains the same it always has: whether Uber is taking on too much risk, too quickly with low tangible results. And that could spell trouble in a speculative market environment like the one some analysts believe we’re in now.
For Uber, there may be a level of risk management related to driver defections in the current decision making. As inflation, especially in gas prices, has hit drivers hard and they have pressed for more help from the company, some drivers have quit and recent research from Wall Street analysts and gig economy experts forecast more defections. And some of those quitting drivers are going to taxi companies.
Esterphanie St. Just, who started driving for Uber in 2015 in California, started working with the unionized taxi movement in California in 2019 as frustrations mounted over making the Uber economics work for her. She contends the longer a driver works for Uber, the less they make as more promotions and bonuses go to new drivers churning through the system (Uber denies this).
After hearing more from taxi drivers and learning more about being a yellow cab driver, finally, in December of last year, she started the process of getting a taxi license and began full time as a taxi driver about a month ago.
“The longer you have been in the Uber industry the more they take and you either quit now or quit later, but it will cost you, because you find out you are a rat in maze always chasing, chasing, chasing.”
Another Learning Opportunity
When NCUA announced its intent to sell credit union taxi borrowers’ loans to hedge fund in January 2020, the agency refused to look at options that would have given these member-borrowers a chance to earn their way out of the decline in collateral value from ride sharing disruption.
NCUA instead took cash at a fraction of the book value of the loans, recorded a $750 million dollar loss in the NCUSIF, and washed its hands of any further responsibility to these credit union members whose fates were turned over to a Wall Street hedge fund.
Earlier this year New York City entered into an agreement to cap the debt owed by individual drivers and extend terms so that remaining loan payments could be covered by earnings.
Drivers Will Determine the Future
Until autonomous taxis are deployed everywhere, the future of public transportation depends on what drivers want to do. For many people owning your own business, as described in the above article, is preferable to being someone else’s employee.
That was the opportunity that credit union taxi medallion lenders were underwriting. Assisting members to own their own business. NCUA washed its hands of the problem by selling at the low point in the cycle of value. Credit union’s paid for the losses and a hedge fund now has all the upside.
I admit that no one could have foreseen the New York City stabilization plan financed by Covid grants, nor the failure of Uber’s business model to be sustainable.
However NCUA’s challenge is internal, not external forces or events. If an organization is not willing to learn from prior difficulties, no one can help. If an organization is determined to learn, then no one can stop them from finding solutions.
If members’ interest are always front and center, NCUA and credit unions will ultimately find workable resolution for problem situations, no matter how seemingly intractable.
Liquidating problems is contrary to why coops were founded and their self-help ethos. The entire industry and its 100+ million members would benefit if NCUA would embrace this collaborative spirit as well.