Since September 2024, over 1,000 taxi medallions have come out of storage, as Uber and Curb dispatches have redirected app demand from TLC-plated FHVs to yellow cabs.
Great question Lenny. This goes back to the arguments we made against the TLC’s use of the utilization rate (UR) in the driver pay formula.
“Subjecting non-medallion ‘black car’ TLC-plated vehicles to UR and minimum pay rules for high-volume (Uber or Lyft) dispatches—but not yellow cabs—directly incentivizes Uber (and Lyft) to dispatch to taxis. That’s in direct conflict with advocating for the best solution for app-focused NYC TLC drivers.”
— AutoMarketplace (June 25, 2024) — link at the end of this comment.
Imagine you’re running Uber in NYC. You have two pools of vehicles to dispatch to:
(1) TLC-plated FHVs, and
(2) Medallion yellow cabs.
When you dispatch to TLC-plated FHVs, you’re subject to driver pay rules tied to utilization rate (UR) and other regulations. You also face an EV/WAV mandate. On the passenger side, fares are structurally higher due to the 8.875% sales tax (and some other fees). Uber often claims that the TLC plate cap forces them to use yellow cabs to expand supply—but that’s largely a false argument. They could increase utilization (UR) of existing TLC-plated vehicles by dispatching more trips to them.
By contrast, when Uber dispatches to yellow cabs, it avoids the HV (Uber/Lyft) UR-based driver pay rules entirely and can offer passengers lower fares thanks to their tax structure. UberX passengers also seem indifferent to getting a taxi if the fare is cheaper. We’ve detailed this “taxi arbitrage” dynamic here - https://automarketplace.substack.com/p/taxi-arbitrage-uberx-dispatches-to.
Hope that’s helpful! This is why we’ve always argued that the UR is overkill. A strong TLC plate cap keeps supply in check until driver pay naturally rises based on supply and demand, then a responsible, limited plate release (e.g., to long-time renters) makes sense. That approach inherently solves utilization issues and removes Uber’s incentive to favor yellow cabs over TLC-plated vehicles.
Many uber drivers are complaining about uber sending jobs to yellow cabs. Can you explain why Uber made this decision?
Great question Lenny. This goes back to the arguments we made against the TLC’s use of the utilization rate (UR) in the driver pay formula.
“Subjecting non-medallion ‘black car’ TLC-plated vehicles to UR and minimum pay rules for high-volume (Uber or Lyft) dispatches—but not yellow cabs—directly incentivizes Uber (and Lyft) to dispatch to taxis. That’s in direct conflict with advocating for the best solution for app-focused NYC TLC drivers.”
— AutoMarketplace (June 25, 2024) — link at the end of this comment.
Imagine you’re running Uber in NYC. You have two pools of vehicles to dispatch to:
(1) TLC-plated FHVs, and
(2) Medallion yellow cabs.
When you dispatch to TLC-plated FHVs, you’re subject to driver pay rules tied to utilization rate (UR) and other regulations. You also face an EV/WAV mandate. On the passenger side, fares are structurally higher due to the 8.875% sales tax (and some other fees). Uber often claims that the TLC plate cap forces them to use yellow cabs to expand supply—but that’s largely a false argument. They could increase utilization (UR) of existing TLC-plated vehicles by dispatching more trips to them.
By contrast, when Uber dispatches to yellow cabs, it avoids the HV (Uber/Lyft) UR-based driver pay rules entirely and can offer passengers lower fares thanks to their tax structure. UberX passengers also seem indifferent to getting a taxi if the fare is cheaper. We’ve detailed this “taxi arbitrage” dynamic here - https://automarketplace.substack.com/p/taxi-arbitrage-uberx-dispatches-to.
Hope that’s helpful! This is why we’ve always argued that the UR is overkill. A strong TLC plate cap keeps supply in check until driver pay naturally rises based on supply and demand, then a responsible, limited plate release (e.g., to long-time renters) makes sense. That approach inherently solves utilization issues and removes Uber’s incentive to favor yellow cabs over TLC-plated vehicles.