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FULL CIRCLE (Part 2): Impact Of Adding NYC Yellow Cabs To Uber's App 🚖🥇📈
In Part 2 of our piece, we share additional thoughts about Uber's announcement on allowing NYC taxis on its app, including the impact on the NYC taxi medallion market
AutoMarketplace.com NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace.com on YouTube ▶️
In Part 2 of our piece (click here for Part 1) related to Uber’s announcement that NYC yellow cabs would be added to their app, we wanted to share some additional thoughts.
Let’s get right back into it!
🤔 One App, Two Rules, Can A NYC Yellow Cab Driver Be Deactivated ❌?
One of the first thoughts that crossed our minds when we heard that NYC taxis could be e-hailed via the Uber app, was whether yellow cab drivers would be subject to app ratings ⭐⭐⭐⭐⭐ and deactivations❌. After all, the only way (at least to our knowledge) a commercially-licensed NYC TLC driver could lose his or her ability to drive a NYC yellow ‘medallion’ taxi would be if their TLC driver’s license was suspended or revoked. In fact, given Uber’s (and Lyft) dominant market share, we recently made the argument that deactivations should be subject to further scrutiny (our recommendation was further arbitration).
Although NYC yellow cab passengers are currently able to call 311 or file a complaint online with the City, it's not as seamless as how Uber’s rating system works (i.e., ability to communicate feedback instantly within app).
In addition, if NYC yellow cab drivers have additional rights/perks vs. "app-only" NYC drivers that could cause tension between both groups. For example, if NYC taxis have the ability to reject Uber trips after seeing specific details or benefit from a different compensation formula, including lower commission "take rates", it would be very controversial among the TLC driver community. Yellow cabs drivers may, and are already beginning to, argue that the sunk cost of purchasing or renting a taxi medallion should limit Uber's ability to take too much of any e-hail fare, especially when Curb and CMT - the taxi payment / app platforms partnering with Uber - are also likely taking a portion of the fare.
🚖 Yellow Cabs May Reclaim Manhattan 🌇
The other big dynamic to watch out for is whether this is the beginning of a yellow cab industry strategy to reclaim the majority of trips (both hand ✋ and e-hail 📱) in Manhattan's Central Business District (CBD), which is generally defined as Midtown to Downtown Manhattan.
What do I mean by this?
From congestion pricing / exemption negotiations and other proposals that specifically target non-yellow cab for-hire vehicles (FHVs) in Manhattan, some interesting dynamics are at play. For example, if yellow cabs establish regulations that make it cheaper for them to operate in Manhattan's CBD vs. non-yellow FHVs, taxis will be able compete with the apps more effectively, increase market share and drive better utilization (% of time doing trips). Furthermore, if Uber (and Lyft) are still making money on connecting yellow cabs with passengers, the companies might be indifferent to any regulations that benefit NYC taxis vs. "normal" TLC-plated cars.
🥇Impact on Taxi Medallion Values & 🚫 FHV License Pause (aka TLC “Plate Cap”)
Following on from the previous section IF NYC yellow ‘medallion’ cabs 🚖:
Have an advantage in Manhattan CBD
Continue to have the exclusive right to do NYC street hails ✋ and also service e-hails 📱 in the five boroughs via Uber (& Lyft)
Have assurances that NYC for-hire vehicle supply will not increase meaningfully (continuation of “TLC Plate Cap”)
It’s likely NYC taxi medallion values will go higher 📈
After all, sophisticated investment firms that bet big on distress medallions (both the medallions and loans attached to them) probably had a fairly thought out thesis on how this all could play out. In fact, even if all three points above don't happen as described (i.e., let's say yellow cabs don’t have an e-hail advantage in Manhattan CBD), any one of the factors would still result in medallion values recovering.
Furthermore, the recently announced City-backed debt restructuring deal provides a direct incentive for the City to protect the value of the taxi medallion (i.e., City-backed guarantee on debt). I think most would agree the best way to protect the value of the NYC taxi medallion is to reintroduce the concept of it being a limited-supply, scarce asset. Therefore, it's hard for us to see the NYC Taxi & Limousine Commission (TLC) lifting the moratorium on FHV Licenses (aka ‘TLC Plate Cap’) in a meaningful way for several years, if not longer.
I know some readers who rent their TLC-plated vehicles will be disappointed to hear this prediction. It’s still our hope that some mechanism can be created for full-time and committed NYC TLC drivers to acquire access to their own plates (if they currently rent) after reaching an “experience” threshold of some sort (Note: The wheelchair accessible vehicle (WAV) exemption to the ‘TLC Plate Cap’ still exists AND taxi medallion values 🥇 are fairly cheap 📉 right now - less than $100,000 - so opportunities to “own your own for-hire plate” still exist).
Another thought some of you might have is that large TLC rental companies that have access to thousands of TLC-plated cars 🚘🚘🚘🚘🚘 will now lobby to keep the status quo. A few points to be made for your consideration.
1. Non-medallion FHV Licenses (TLC Plates) cannot be transferred, like a taxi medallion can be transferred. ⛔ AN INDIVIDUAL CANNOT SELL THEIR TLC PLATES ⛔ By our calculation the majority of Uber/Lyft drivers actually control/own their own TLC plates, so the rental companies may not be as influential as reported. That being said, some do control thousands of FHV Licenses still.
2. Non-medallion FHV Licenses (TLC plates) belonging to a corporation, known as an FHV Corporation, CAN BE transferred by effectively selling the entire company. This is more akin to selling a business though, than it is to a taxi medallion transfer. That being said, you’ll likely see increased regulations around lease rates and invoicing
Honestly, I don't know how exactly this all plays out, but it's just very hard to see the TLC opening up FHV licenses again OR at least reintroducing the status quo that existed before the initial August 2018 FHV License Pause came about. For example, when mobility startup Revel announced its intention to build a large for-hire EV fleet last year, the TLC’s quick action to remove the EV exemption to the ‘TLC Plate Cap’, we believe, is indicative that a strict for-hire vehicle supply policy will be followed.
🌎 Groundwork for Universal NYC TLC App?
Finally, before we conclude, we thought it would be worth mentioning that once a ‘status quo’ exists where yellow cabs, Ubers, Lyfts, and other base vehicles can be e-hailed, it raises an interesting prospect. The City may seek to create a “universal app” that allows for a marketplace where all passenger trip demand can be connected with NYC for-hire vehicle supply.
For example, imagine the NYC TLC creates a demand & supply aggregation platform, a Kayak.com if you will, but for NYC for-hire trips. Prospective passengers could then view a variety of options, including Uber/Lyft, that would make it easier to compare pricing and wait times. If you believe in a future that is characterized by autonomous vehicles (AVs), the City may seek to preemptively create tech infrastructure that facilitates a longer tail of bases and people supplying for-hire vehicles. This is definitely a more speculative thought, but one we thought was worth sharing. We also think running an on-demand ridesharing service is fairly complicated, which might be better suited for private enterprise. Interestingly the idea has been brought up and discussed by certain members of the NYC Council before!
“When I raise my hand on the street, I don’t care what yellow cab company stops for me. I just want a cab…People should be able to raise their hand digitally and get a response from anyone... And every driver could compete regardless of what company they drive for. It gives drivers a way to cut out the middleman of Uber and Lyft and go directly to the consumer.” - NYC Council Member Ben Kallos
As always let us know your thoughts below or by emailing us at info@automarketplace.com
AutoMarketplace.com NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace.com on YouTube ▶️