“Ride-sharing has revolutionized how people move around the world. People know they have an alternative to their car. The alternative is good, cheap, available, trustworthy, and safe,” Uber New York CEO Josh Mohrer told “Globes” in a special interview.
“After the home, the car is the second most expensive asset most people own, but they do not utilize it. For 98% of the time it is unused, simply parked. Why not use the existing resources on hand?”
Uber is the global leader in ride-sourcing, with a market cap of $40 billion. It was founded in 2009 in San Francisco and expanded to 260 cities in 60 countries.
Ride-sharing, in which the vehicle owner drives other passengers for a fee, differs from carpooling. The latter model does not provide a living but merely offers savings for people heading to the same destination.
“It’s a win-win scenario for both parties,” says Mohrer, explaining that under their model, the car owners share the expenses of vehicle maintenance with others while the passengers save the trouble of driving, waiting in traffic, and finding and paying for a parking spot.
Ride-sharing is part of a much larger trend towards a shared economy, or social consumption, which is enabled by developing technologies and smartphones. The model allows ordinary people to share their products and services with others; the most prominent examples of the trend are tourism startup Airbnb which allows people to rent their homes directly to users and transportation startups like Uber, Lyft, and Chinese entry Didi Chuxing.
But the shared economy trend is expanding down all avenues. In Boston, Store X offers a platform for renting storage spaces.
Auditing giant PricewaterhouseCoopers estimated the shared economy generated $15 billion in revenue in 2013; it is expected to grow by 30% annually until 2025. The revenue of ride-sourcing startups is similarly expected to grow by 30% each year.
“This revolution will continue and it will expand,” says Mohrer. “You leverage an asset to earn money and also offer discounted services to others. Vehicles are the perfect example. Every person who owns a car can act as a taxi driver and drive people in their free time. Some people have turned it into a full-time job, while others use it to supplement their income.
“For example, a student on break can use his car to drive customers and save money ahead of the school year; a military veteran looking for a full-time position can work in the meantime as a driver. There is no commitment to shift work or to a minimum number of hours.”
In 2014, 42% of all Uber rides in New York were offered by drivers who worked less than 15 hours per week.
Currently Uber offers a wide variety of transport options to allow the best fit for each customer: some customers want an alternative to a taxi UberX while others want to split the fare with people heading in the same direction UberPool.
“People rushing to work will probably prefer to use X while those wishing to save money will take a Pool,” he says.
“The pie is growing; cab drivers are earning”
A study by TASC Strategic Consulting, ordered by Uber Israel, found cab ride fares dropped by 20%-50% in countries that offer ride-sharing (Israel is expected to see a 32% decrease), household expenses were lowered (as more people decided against purchasing a car), and road congestion decreased the last of which costs the Israeli economy NIS 15 billion per year.
Other benefits include reductions in air pollution and traffic accidents, better integration of public transport options, and a better ability to respond to temporary bottlenecks like the construction of the Tel Aviv metropolitan light rail.
“There are no losers,” claims Mohrer, “The passengers benefit, the state benefits, and the drivers benefit.”
But Uber has not smoothly entered each and every global market. French cab drivers protested the company in January, blocking a road in Paris. Last month, it was reported Russia threatened to shutter Uber operations in Moscow if the company does not limit its service to authorized taxi drivers.
In its home state of California, Uber is facing a class-action lawsuit filed by its drivers, who demand it recognizes them as employees and not as independent contractors. As employees, they would be eligible to various benefits, including refunds on expenses like fuel and vehicle maintenance.
In Israel, Uber is blocked by politics. Minister of Transportation Yisrael Katz has stringently opposed its entry to the country. Prime Minister Benjamin Netanyahu slammed the minister for his opposition at a recent cabinet meeting, claiming Katz was bowing to pressure.
For his part, Katz said the government must compensate taxi drivers to the tune of NIS 8-9 billion if it wanted to promote ride-sharing in Israel. “I do not understand where the myth of cab drivers as power players emerged they are not a strong lobby. These are not the vehicle importers, with all due respect. This is the working public; it is my job to help them compete on a level playing field,” he said.
However, in the past decade, the number of vehicles per capita rose by 31% while the number of taxis per capita only increased by 4.8%. The cost of using a private car has gone up by 30% in the past 15 years, while cab fares rose 65%, according to data from the Jerusalem Institute for Israel Studies.
Minister of Finance Moshe Kahlon has also expressed opposition to Uber entering the Israeli market. In a July “Globes” report by Meirav Moran, the head of the taxi association, Avraham Fried, said he spoke to Kahlon twice over the ride-sharing phenomenon. “In both conversations, which were unofficial, Kahlon told me, ‘I am your lobbyist, I will not let you be hurt, because I know what the taxi sector is.’ We were not before an election, when politicians are full of promises. We were after the election, and I believe Kahlon fully meant what he was saying,” Friend said at the time. Kahlon chose not to comment then.
‘Regular’ taxis are not profitable. Uber’s entry will certainly hurt their earnings.
“The opposite is true. Uber is not competing with cabs but with private cars; it is an important distinction. It reaches places traditional cab drivers do not, at hours in which less cabs are available. In these scenarios, people would simply use their own cars. Uber is essentially expanding the pie for all drivers, including the cabs running before Uber entered the market.”
The TASC study said the entry of a ride-sharing company to a city increases the number of rides (both regular and shared) by dozens of percentage points. The report cites Los Angeles, where the number of rides increased by 100% since ride-sourcing was introduced five years ago.
The report includes other figures intended to alleviate the concerns of cab drivers.
“The ministers who claim they are fighting the monopolists need to keep their word. Instead of looking out for all consumers, they are maintaining the interests of smaller groups,” said Uber Israel CEO Yoni Greifman.
Furthermore, said Greifman, Uber is willing to work towards a framework that assures compensation for cab drivers whose living is hurt. “It’s a mobility fund,” he said, “You charge a fee from every person using shared transportation, and it is paid out to the drivers.
“We have solutions for every scenario, and we presented them to anyone who was willing to listen,” said Greifman, who listed the officials Uber has met, including representatives from the Tax Authority, the Ministry of Transportation and the Ministry of Finance. “If it was up to the professional officials, we would have long ago successfully entered Israel; but it is not up to them.”
Meanwhile, more and more cars are hitting the road. In the past two years alone, there were more than half a million new vehicles: 240,000 in 2014 and 256,000 in 2015. Israelis spent NIS 50 billion on private vehicles in those years.
“It saddens me,” says Mohrer, “It is unnecessary. There are enough services that offer alternatives to private cars. Israel, which is considered the Startup Nation, should adopt these technologies.”
Despite repeated attempts, the Ministry of Transportation did not comment on the claims raised in the report.
Uber drivers’ pay rises each year
In New York, drivers’ earnings increase by 6.3% each year. In 2012, average pay for an Uber driver was $26 per hour; in 2015, it reached $39 per hour.
Mohrer considers the achievement one of market penetration. “People are used to their cars, it takes them time to get used to something else,” he says, “But now people trust Uber and you can see that because many of our rides are one-way. Meaning our customers use public transportation on the way, and use Uber to return.”
Mohrer says there is a severe selection process for becoming an Uber driver, and that each driver must undergo a training course, be at least 23 years old, and have no criminal record. Furthermore, the company inspects the vehicle’s condition, assuring it is registered and insured. “Driving with an Uber is safer than any other ride,” he says. “The passenger can find all the information about the driver before they arrive; five contacts which are pre-selected can also see where they are on the map in real time. Then we also offer the ability for both driver and passenger to rate each other, which forces both parties to be on their best behavior.”
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2016
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