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Taxi app backlash hits disillusioned European and American markets

Protests in London, Milan and Brussels focus on unfair advantage of Uber platform, with legislation already banning its use in Germany and Canada. Asian taxi app operators advised to learn from the lessons of their overseas counterparts.

Photo: Fare’s fair: anti-taxi app protests are now commonplace.
Fare's fair: anti-taxi app protests are now commonplace.

Apps that allow you to book/pay for taxis via smartphones have become big business in many parts of the world over recent years – especially in Asia. Despite their considerable success in a number of cities – notably Hong Kong, Shanghai, Singapore and Mumbai – further afield there has been a growing resistance to the phenomenon. As, perhaps, a sign of what is to come in Asia, many cities across Europe and North America have faced a distinct backlash against this ubiquitous software.

The disquiet has been spurred by two things in particular – dissatisfaction with the performance of established apps, something that has slowed their uptake in the market, and outright anger at the newer entrants to the market. In the latter case, this has largely been down to the way the newer apps have blurred the line between unlicensed private-hire cabs and officially-regulated taxis.

Of late, it has been the protests over the newer apps that have been hitting the headlines. Much of the hostility is aimed at Uber, a highly successful US-based taxi app, which is now being widely adopted on an international basis.

At first glance, Uber is virtually indistinguishable from many of its rival apps. Essentially, it's a "pick-up" service that allows users to find the nearest cab, order it and track its progress. Crucially, though, the fare – which is set by Uber – is based on the time and distance of the journey, rather than being a fixed price determined in advance.

In Milan, Italy's second largest city, licensed taxi drivers recently went on strike over the issue, complaining that Uber is threatening their livelihoods. The app has also been banned in Brussels, the Belgian capital, and is now the subject of court action in Germany and Canada. Further protests – some of which have turned violent – have been held in cities as far apart as San Francisco and Paris. In the latest development, London's infamous black-cab drivers are now threatening to bring gridlock to the city in June if action is not taken against Uber.

The drivers' main complaint is that Uber's success is built on unfair economic advantages. They say it operates without having to meet the costs of the expensive extras its competitors are obliged to pay for – costly operating licences, for example, or fare meters. The London Taxi Drivers Association calls Uber "a monster that has no qualms about breaching any and all laws in pursuit of profit".

Uber naturally disagrees. It says it's simply using new technology to give customers the convenience they want, convenience that the taxi industry has been unable or unwilling to provide. Travis Kalanick, Uber's Chief Executive, says: "The taxi industry has been ripe for disruption for years, but only new technology has allowed it to really kick in. These protests are from cab companies that would prefer not to compete at all. They like things the way they are."

There's no doubt that Uber is proving a hit with customers, though some of its business practices have caused concern. It recently ran into a PR storm over its policy of "surge pricing" – drastically increasing its fares at times of high demand, such as during holiday periods or public transport strikes. Kalanick shrugs off the criticism, saying: "It's going to take folks some time to accept it. There's 70 years of conditioning concerning the fixed fares of taxis."

Opportunistically perhaps, concerns over passenger safety have also been raised. Unlike Uber cabbies, drivers for regulated taxi companies have to pass rigorous and advanced driving examinations and undergo extensive background checks before being licensed to carry passengers. As Uber is not officially a cab company – and thus not subject to the same rules – its recruitment process is far less onerous.

The safety issue has been highlighted by recent reports of passengers – especially women – being harassed by Uber drivers. Dave Sutton from Who's Driving You, an American public service initiative that monitors companies like Uber, says: "Ride-share services are chock-full of dangers. There are gaps in insurance and poorly-conducted third-party background checks."

Uber is slightly cagey about just how many drivers and customers it has signed up. Its rapid rise, though, is undeniable. It's now available in more than 100 cities in more than 30 countries, with the company's worth being valued at some US$3.5 billion (HK$27.1 billion). The question is, however, whether its on-going clashes with the established taxi industry will stem its growth. Conflicts with regulatory authorities and opposition from established taxi companies have certainly hindered its progress to date. As a result, it's no surprise that much of its success has been in locations without an existing properly-regulated taxi service.

Uber aside, a number of other taxi apps have tried to work more in harmony with existing taxi operators. Many of these, however, have faced their own problems. Hailo, for instance, a London-founded passenger "matching" app, is now finding that many of its drivers are turning against it.

Photos: Hailo and Uber: apps under attack.
Hailo and Uber: apps under attack.

Hailo is currently available in 16 cities across Europe, North America and Asia and boasts of having more than 30,000 drivers signed up and of having provided more than three million rides. While it has branded itself as a friend to the taxi industry – in London, it styles itself as "The Black-Cab App" – a degree of disillusionment has now clearly set in.

Richard Cudlip is a London black-cab driver who signed up to Hailo early on. He welcomes new technology, having been involved in a similar project that aimed to operate via the social media site Twitter. He has, however, just deleted the app after becoming increasingly frustrated with it.

He says: "It's not really improved my business. It's useful for the first couple of jobs in the morning, in the suburbs, when I don't mind paying 10% of the fare to Hailo. Once I'm in the city, though, the incentive to use Hailo disappears. It's easier to pick up fares on the street, so I turn it off. It's only when it goes quiet again late at night that I might switch it back on."

He estimates that just 10% of his business came through Hailo and claims that many other black-cab drivers have had the same experience. He says: "Hailo over-estimated how much scope there was for change. The taxi business actually works very efficiently in London, so it doesn't need the technology. It's only around the fringes – outside central London and late at night, for example – that it works. It fills in the gaps."

Cudlip also criticises the way the company finances the service. He says: "Hailo decided that drivers would pay, that it would effectively come at no extra cost to the customers. They got the balance wrong. The result is that drivers only use Hailo if they really want the job."

With drivers opting out of Hailo – or switching the app off – customers have found it harder to call up taxis, leading many to give up on the service altogether despite its convenience. "Hardly any Hailo cabs in Central London this morning," notes one exasperated potential passenger on Twitter. Another calls Hailo the "worst app ever invented" and adds: "I have more chance of getting a taxi with a stick of rock."

Hailo's response has been to move away from solely dealing with licensed taxis and move into the private-hire market. It claims it has had no choice but to diversify. Ron Zeghibe, the company's Chairman, says: "There is no point burying our heads in the sand. When we started, it was a straight fight between taxis and private hire. Now it's not so simple. These are tough times and that requires tough decisions. It means doing what's right, not what's popular."

Hailo, though, may simply have created a new problem for itself. Its overtures to the minicab sector have alienated the licensed taxi drivers, the bedrock of the company to date. As more and more drivers follow Cudlip's example – and turn off the app rather permanently – it becomes difficult to see a prosperous future for the business.

Photo: Hailo goodbye: taxi drivers opt out of pick-up app.
Hailo goodbye: taxi drivers opt out of pick-up app.

The lesson for both established players and start-ups in the taxi app industry is clear. Concentrating on the benefits for passengers can be the key to short-term success, but a failure to keep drivers and the regulatory authorities happy will inevitably hinder growth in the long term. It is a lesson that operators in Beijing, Shanghai and the mainland's other tier one and two cities will be wise to learn from.

Robert Rea, Special Correspondent, London

Content provided by Picture: HKTDC Research
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