Darwin’s theory of evolution is active in all aspects of reality: biology, technology, economics, you name it. The universe is built on the survival of the fittest. Rideshare Evolution is no different. Only the strong (read, fittest for the environment) will survive.
The environment changes all the time and those that adapt or are better suited will do well, those that are not will fail. Uber/Lyft succeeded because the taxi companies had no competition. They were a state-sponsored monopoly/mafia and they were easy marks for disruption. Technology enabled these new competitors to find customers, bill customers, pay drivers, and navigate. That tech replaced the dispatcher, rate meter, maps, medallions and credit card readers. The environment that taxis lived in changed! Taxis were doomed. Until they weren’t.
The Empire Strikes Back
Taxi businesses are like a cornered, wounded animal with three options: fight, flight, or freeze. They have to fight to survive and have adopted some technology that allows them to get rid of old, outdated equipment and processes.
That helps their cause a little, but by doing only that, they are still doomed because that response addresses nothing but internal cost structures. The world taxis live in is still rideshare-dominated, where individuals operate individual taxi businesses by the millions.
What the taxi industry needs to do is change the environment that they live in. They need the Rideshare gig business model to go away.
Make everyone an employee!
Rideshare drivers are mostly part-time. Taxi drivers (employees) work full-time.
The taxi industry wants to remove all independent contractors. Doing that turns Uber and Lyft into taxi companies. Now, everybody is playing the same game again. Everybody hires drivers. Everybody pays minimum wage. Everybody runs fleet cars. This gives all the power back to the taxi companies.
Who wants to be an employee?
Well, not most rideshare drivers, although all these types of legislative responses are being pitched as being done ‘for’ drivers. You know, to ‘help’ drivers and ‘improve’ working conditions.
Reducing driver numbers
One response has been calling for laws that limit the number of drivers allowed in any area, to reduce congestion and help existing drivers make more money per hour. That response turns rideshare platform apps into virtual medallions. Who wants to drive in NYC? You do? Well, you will need to pay for a location slot. You need to beg for a time slot. You need to ask for access for everything.
Politicians could pass bills to improve conditions for us as business owners. Instead, the taxi interests have convinced them (and some ex-taxi, now rideshare drivers) it will ‘help’ us all if we are employees. No, it won’t.
Give us a minimum fare percentage? Great! Give us access to pooled insurance and 401k programs? Awesome! Let us keep business deductions for expenses? Yes! Do we want to continue to work for any platform at the same time? Yes. Well, none of that is what’s happening. We get California’s new law AB5.
And what we really get is enormous restrictions on driving. Employee status means we cannot deduct any expenses from our taxes. NONE. That means no personal car use. We get Hiring and Firing at will, the company’s will. We will be forced to use a company owned and branded car: a taxi cab. We will be working in pre-determined shifts and areas. Why? Because this is what employees do. There will be no connection between what we make for the company (fare) and what we earn (minimum wage). You know, we’ll just be a taxi company employee who is paid to be a butt in a seat.
What the future holds
Let’s look at one taxi company in particular as an example: PT Blue Bird of Indonesia using information from Bloomberg.
Competition from the technology titans wiped out $1.7 billion, or almost 80%, of PT Blue Bird‘s market value from a peak. Revenue plunged 23% in three years and the latest quarterly earnings fell to a record low. But rather than give up, the 54-year-old cab operator is now seeking to turn the tide.
Noni Purnomo, the company’s new president, understands the company needs to re-invent itself to survive.
While sustainability is her immediate priority, Purnomo’s goal eventually is to beat the ride-hailing giants that have upended what was once an industry renowned for its steady revenue and dominated by small owners and families like Purnomo’s. She’s up against Singapore-based Grab, the regional giant that bought Uber Technologies Inc.‘s Southeast Asian operations last year.
They do this by running an efficient fleet. Good, business basics.
Purnomo has already added about two dozen EVs to Blue Bird’s almost 30,000-strong fleet of cabs that operate in the cities of Java, Sumatra, Bali, Lombok and Batam. Eventually, the plan is to have 2,000 of the zero-emission taxis from Tesla and Chinese maker BYD, she said.
30,000 cabs in this context represents “small owners and families” according to this article. That is what we are up against when we are running our taxi business with a fleet of ONE. The only thing in our favor is that there are MILLIONS of us. At least for now.
Note that Purnomo is pinning their future on running TESLAs. In INDONESIA.
EVs may give her company an edge as initial data have shown encouraging signs, she said. The vehicles cost 40% less to operate than fossil fuel-powered cars, and generate 30% more revenue, according to her.
Besides, her rivals can’t replicate this model easily, Purnomo said. Their asset-light model would require drivers to bear the financing costs of an expensive EV, a risky proposition for most individuals, she said. A representative for Grab didn’t respond to request for comments.
“We have a different business model and the company can take the risk instead of the individual,” she said.
Electric vehicles: the only survivors
The survival of the fittest ensures it, regardless if the EV is driven by a taxi company or a rideshare driver. But that means that the existing fleet must turn over. And there’s the rub: “the company can take the risk instead of the individual.” Taxi companies have the money, or they can raise the money to do this. You do too, you just may not know it.
When someone takes your cheese, you fight back.
Connecting with Rideshare Companies.
Blue Bird already has an alliance with Gojek, operated by PT Aplikasi Karya Anak Bangsa, that allows its fleet to be available on the Gojek app. While it opens up the customer base, it also has the disadvantage of lower margins, Liew said. Gojek offers both motorcycle and cab rides.
If we allow (and encourage!) rideshare companies to become taxi companies, or partners with taxi companies, then the existing taxi companies are what the app platform companies will use to make money. Simple, really. Why set up an employee model system of your own and the costs that go with that, when you can just use any old existing taxi company and get the same result? Let them hire/fire employees. Stick to the core business: apps and databases.
The more things change, the more they remain the same. Rideshare is about to live Charles Darwin’s theory.