Today the rise of ridesharing has made headlines across the world. Whether it is “uberpreneuers” making a big income by using their car as a cab or a protest against Uber orchestrated by the Taxi industry, we are living in interesting times.
But don’t get us wrong. We empathize with the taxi drivers, but the scenes of older players getting itchy is a scene we have seen many times. Surely the horse cart owners wouldn’t have liked it when cars started being used by all and sundry. Similarly, now we can see the same kind of contest taking place between traditional TV and the on-demand content industry led by the likes of Hulu, Amazon Prime, and Netflix.
Whenever the new kid on the block disrupts the way things are supposed to be, emotions seem to get the better of many of the old players. Instead of being upset with the new kid, these old players need to realize that the new kid could not have succeeded if they (the old players) had done their job right and met the needs of the customers in a better manner.
Whatever one’s view is on this, this duel of the ridesharing and taxi makes for an interesting contest nevertheless. So let’s analyze this, and see for ourselves what each one has to offer and what their individual challenges are.
Let’s Get into The Duel
If you ask any taxi industry expert, they will tell you the taxi is everything that Uber and Lyft aren’t:
- The drivers are more experienced and follow particular guidelines.
- The industry is well-regulated.
- Drivers go through rigorous background checks before being issued driving permits.
If you ask an Uberpreneur or a Lyft driver what ridesharing is they will tell you:
- It is an opportunity for non-taxi owners to earn a little side income by monetizing the empty seats in their cars.
- The cars use advanced smartphone technology to help riders find a cab and vice versa.
- There is a review system which lets riders and drivers rate each other.
- Such car sharing is good for the environment (who can argue with that?).
The terms ‘carpooling’ and ‘ridesharing’ are often used interchangeably. But if we want to be very accurate it is important to note how they differ.
Please note that while we too have used carpooling and ridesharing interchangeably for the most part, ridesharing is a hypernym of carpooling the way the term “color” is a hypernym of ‘”red.”
More specifically, carpooling is a term used for the kind of ridesharing where there is no company involved (and so you don’t pay a penny to a company like Uber or Lyft), and instead, it’s a group of friends, colleagues or family members who may share a ride each day.
As far as driving expenses during carpool rides are concerned, carpoolers themselves share driving expenses which are split among the driver and commuters.
Carpooling Example: So for instance if there are 3 friends Bob, John, and Tim who work at the same company (and for 6 days each week), and they want to do carpooling, this is how it may happen:
- On Monday and Tuesday, they use Bob’s car to pick each one from their home and reach office. Then on their way back Bob drops each one back at their homes.
- On Wednesday and Thursday, they use John’s car to do the same.
- On Friday and Saturday, they use Tim’s car to do the same.
So this is quite distinct from ridesharing in the sense that in the case of ridesharing there is a car service (an intermediary which charges a fee) like Uber and Lyft which uses smartphone technology to help one arrange rides in privately owned cars. Don’t get us wrong; there do exist some carpooling apps too but like we said: carpooling is typically done by colleagues, friends and family members with no intermediary charging a fee.
Yes, that’s true. Ridesharing is not a recent phenomenon. And now that you have understood the basics, let’s give you a history lesson (yes, we love showing off our knowledge; especially when it’s about ridesharing!) on how this all started back in the early 1900s.
Back in 1914, due to the availability of cheap automobiles in the US market coupled with a recession, ridesharing first started when some car owners began offering seats in their cars in return for a fare that was equivalent to the streetcar fair which was known as a jitney. Soon the jitney phenomenon had spread.
But the streetcar operators along with the government took various steps and reduced this early form of ridesharing by 1918, so as to protect the streetcar operators (ring any bells?).
Then during World War II, due to an immense lack of resources, the government encouraged people to get involved in ridesharing. One can understand the government’s strong interest in ridesharing from this campaign. They initiated the campaign along with the oil industry and spent $8 million ($100 million in today’s currency) on:
Here are a few other images from this campaign which are not as interesting (or shocking) as the above Hitler posters but are interesting nevertheless:
But after the war ended, the ridesharing industry withered, only to be revived again for a short period of time during the 1970s oil embargo when the prices of oil skyrocketed.
Then when in the 1980s the price of oil dropped, and the income levels of the consumers rose, the ridesharing industry saw a downfall once again.
Ridesharing in its present form was bound to happen. The number of cars worldwide is to increase to 1.7 billion by the year 2035 as predicted by the International Energy Agency (IEA). The taxi service, as you will find in this comprehensive guide, was not so great and was slow in adapting to technology. This, coupled with the rise of tech-enabled business solutions where gadgets, apps and what not are used to make life easy for people, made way for the likes of Uber and Lyft to disrupt the transport industry big time.
Read on as we explain in detail how ridesharing has grown so quickly in today’s world by leveraging smart technology to improve the “user experience” and comfort making the likes of Uber and Lyft very desirable for the drivers and riders alike.
This leads us (or rather you) to wonder how ridesharing actually works.
I think we all know how taxis work. Typically, each city limits the number of taxis on the road through a license permit scheme. There have also been restrictions on cars other than having medallions (cars painted in yellow and black colors that typical taxis have) to pick up passengers in at least some cities, but due to ridesharing, the value of such medallions is diminishing rapidly.
Despite the number of taxis diminishing it is interesting to note that according to Wikipedia, “As of 2012, in the United States: the total number of taxi cab drivers is 233,900; the average annual salary of a taxi cab driver is $22,820; the expected percent job increase over the next 10 years is 16%.”
Furthermore, in some states taxis are required to have a working credit card machine (the one in which you swipe your card) but chances are they may lie about it being broken because with credit cards they have to pay a processing fee and they also have to wait to get the payment in their account, as mentioned in this report from Boston.
Looking at the way the taxi system is, the drivers are rarely the employees of the company. Instead, they have typically leased the vehicle on a per-shift basis.
Therefore, depending on your experience, you may want to tip the taxi driver. In the case of New York, one ought to tip the driver 15-20% if the driver has been nice and helpful.
Each rideshare company has different policies when it comes to how they work via smartphone technology – specifically through apps. But, roughly speaking, here is how they work:
In the first step, you have to download a particular rideshare app on your smartphone such an an Uber app or a Lyft app.
After that, you will be required to sign up and enter your personal details as well as credit card or PayPal information.
Then as a passenger, you can then use the app to request a ride while also mentioning the type of service you would like and your required destination.
With the app that you installed, the GPS feature will be used to track your present location and find the nearest available driver in your vicinity. It will also give you information about the driver including his name, car license plate number, and the route.
Furthermore, you can track the driver’s location via GPS and receive a text message when he or she arrives. This is how an app connects you to a potential driver for a carpooling or ridesharing service.
Warning for naughty riders: Please note that feedback, in Uber, is a 2-way street. The drivers too can rate the passengers, and if you are not polite or you damage their cabs in some way their ratings can mean that next time, there would be no Uber drivers left to pick you.
As for carpooling, the rates are entirely up to the carpool group to decide.
Additionally, you can get a quote of the fares by entering a pick and drop off location with the help of the GPS on your phone, and you will be able to calculate an estimated fare. The credit card that you used to register will be automatically charged after the trip, and you will receive a receipt via email.
However, most taxis do not accept in-app payments and so one has to use cash for payments or use the credit card machine instead.
Here is a comparison of Uber, Lyft, and Taxi with respect to the fares for five major U.S. cities.
Traditional taxi services have been struggling to keep up with on-demand app-based ridesharing services right from the latter groups’ inception. The fact that ridesharing services have minimized wait times, offer efficient and quick payment interactions (something that taxis lack) and provide app based ratings/feedback have threatened the existence of metered taxis.
On a more specific note, the time that taxi cabs waste on the roads is shocking. In a study titled Disruptive Change in the Taxi Business: The Case of Uber, taxi patterns and numbers across five US cities were studied and here is what was concluded:
“UberX drivers have a substantially higher capacity utilization rate than do taxi drivers in every city except New York, where the utilization rates are very similar. In Boston, the time-based capacity utilization rate is 44 percent higher for UberX drivers than for taxi drivers, and in San Francisco it is 41 percent higher.”
Furthermore, the authors of the report, Judd Cramer and Alan Krueger noted that when they measured the mileage based capacity of taxi’s vs. UberX, they found out the following:
“In Los Angeles, taxi drivers have a passenger in the car for 40.7 percent of the miles they drive, while UberX drivers have a passenger in the car for 64.2 percent of their miles, resulting in a 58 percent higher capacity utilization rate for UberX drivers. In Seattle, UberX drivers achieve a 41 percent higher capacity utilization rate than taxis in terms of share of miles driven with a passenger in the car.”
This brings us to the conclusion that the utilization of smartphone technology by ridesharing services makes it easier for passengers to connect with drivers thus making ridesharing cabs much more efficient than the traditional metered taxi.
To illustrate the differences between ridesharing and taxi further, let us share an interesting graphic which compares UberX (Uber’s cheapest and most basic option) with a traditional taxi.
Since the 21st century is under massive technological transformation, anything that goes digital automatically catches up with the masses. The same goes for transportation.
Because ridesharing companies such as Uber and Lyft have embraced technology, they have undoubtedly proven to be a disruptive force in the transportation industry. So much that their impact is being felt especially by taxis. Here’s is a little more on this:
“Without data you’re just another person with an opinion.” – W. Edwards Deming
The issue with taxi companies is that they didn’t treat their data well. They didn’t talk to it, they didn’t feed it, they didn’t ask it to tell them stories. And the results of not treating their data well are known by all.
In contrast, ridesharing companies used Big Data analytics to gain further insight into consumer behavior. Yes, Uber and Lyft were not simply filling in a void that the taxis had left out; i.e. getting from point A to B in a faster and more technologically advanced manner. They also upped their game by collecting valuable consumer data along the way.
This helped these companies learn individual customer preferences so that they could tailor their services to meet those needs. This is something that traditional taxis could not do as they were not investing in collecting and analyzing valuable data on their drivers, cabs, and customers.
For example, Uber took its customer care to the next level by studying their customer preferences such as the places they like to visit the most (like hotels for instance) and partnering with hotel chains and other such places to offer special discounts to Uber users. Now isn’t this super amazing?
The fact that ridesharing companies came with tech-savvy e-hailing programs has led to further competition and innovation in the transportation industry.
We can witness this in San Francisco where several taxi fleets have embraced tech-based e-hailing app programs so as to be able to compete with ridesharing/carpooling services. However, they still have a long way to go since credible statistics on Uber’s revenue (based in San Francisco) revealed that Uber earns three times more than the entire taxi market ($500 million vs. $140 million).
This brings us to a bitter fact that taxis in several cities which have not embraced technology are quickly running out of business.
Ridesharing companies do not require their drivers to pass several time-intensive exams nor do they have fixed work. While not getting them to pass certain exams may be a debatable issue, but with the increased flexibility these incentives get more people to become ridesharing drivers than traditional drivers.
Additionally, this infographic that our sister company created reveals how ridesharing crushed the taxi in 2015.
This surely is an important issue, and it was something I had not paid attention to before my friend and the award-winning Australian entrepreneur and artist Peter Gould talked about it.
When I posted the above infographic in the (secret) Facebook group of Peter that he has been kind enough toinduct me in, Peter brought my attention to the plight of taxi drivers.
Actually, let me post a screenshot of the actual conversation:
Peter is a smart guy with a good heart, and he surely raised a good point. There are many others who feel the same, and it surely is a debatable issue. But some have a different view on the subject.
So there you have it: a view from both sides. In my view, and I am no expert on the ethics of this, I think the poorer lot of our society need more of our help and support, and so the government, as well as the civil society, should do more to enable them in providing better services including great customer care and we also got to help them avail better opportunities. I can surely write much more on this but I think this much is enough for now as writing more at this point would be a bit out of the scope of this guide.
While both taxi and ridesharing services are constantly vying to capture the market, there is one major difference between them which is the number of passengers allowed on each trip.
Ridesharing/carpooling caters to carry one or more passengers at a given time while taxi apps cater to carry solely a single passenger. There is no concept of shared rides or whatsoever in taxis or yellow cabs.
The estimated fares of carpooling are the cheapest of all. Using a taxi is more expensive than carpooling but cheaper than ridesharing. Rideshare services have surge pricing which means that the prices get even higher when the demand is high. Ridesharing companies defend this type of pricing by arguing that the higher pricing when the there are more riders means more people will be encouraged to use their cars as cabs.
As mentioned by a Malaysian entrepreneur Irfan Khairi who is a friend and visits Dubai frequently due to his business engagements, Uber is surely more expensive than a taxi but due to the ease of use and the comfort, many prefer Uber over a traditional taxi.
Also, rideshare services like Uber and Lyft offer a dedicated fleet of vehicles while taxi services are availed via existing fleets of vehicles from different cab service providers.
Taxi services are increasing at a high rate, and they benefit both driver and customers in a number of ways which include the following:
Because cabs hailed via taxi are driven by well-trained drivers who have undergone rigorous training, you will feel safer. Additionally, taxis are mostly fitted with standard safety precautions such as video cameras as well as pixel glass dividers. Moreover, some taxis also include GPS units fixed firmly in the vehicles as compared to GPS on phones which Uber and Lyft drivers have, and so it may be easier to operate them and harder to inadvertently close them.
Furthermore, in some cities like San Francisco, it is mandatory for cabbies to let their customers know that they are being recorded. This lessens the likelihood of incidents such as theft or assaults involving drivers or passengers.
On the other hand, it is reported that ridesharing companies rarely take steps to ensure safety for drivers.
According to Consumer Reports, a taxi is much cheaper than Uber and Lyft. Uber and Lyft can charge up to four times the actual price when the demand is high.
Carpooling can be cheaper than a taxi though since it is basically a group of individuals who agree upon rates among themselves, and unlike a driver who may have to make a profit, their sole purpose may be to divide the actual costs.
Meanwhile, traditional cabs are also advantageous for drivers in a way that they compensate drivers for the time spent waiting during times like traffic jams.
Taxi cabs require drivers who have commercial licenses. This is a hefty process, especially in cities like London where a tough “knowledge test” is required to be passed by all cab drivers). Ridesharing and carpooling apps forego this cumbersome procedure. In fact, Uber, a popular ridesharing service, strictly forbids its drivers to own commercial licenses for their vehicles. In one instance, Uber suspended Southern California drivers for getting commercial licenses.
Ridesharing/carpooling services have a significant number of benefits for both passengers and drivers which include the following:
Ridesharing may be more expensive than a taxi, but it is a fact that by hailing Uber and Lyft, etc., you save on the costs that you would otherwise have to spend on gas, maintenance, and taxes on a personal vehicle.
Moreover, as a ridesharing driver, you will also be able to save on auto insurance costs as some companies tend to slash down rates for carpoolers.
The fact that you will be able to save more with carpooling is further verified by the American Automobile Association, who in their 2015 report mentioned that an average American driver driving 15,000 miles annually will spend at least 58 cents per mile to cover up all driving costs. So in case two individuals decide to carpool to and fro work for a total distance of 50 miles per day, they can both end u
It should also be noted that now you can carpool with Uber. Uber is a ridesharing service but its uberPOOL service lets you share your car/driver with other passengers. Now this is a basically a hybrid of ridesharing and carpooling. There is a company involved (Uber) that the riders pay the fare to, but there are multiple riders who divide the costs among themselves.
Ridesharing/carpool enables you to hail a ride from any location and have it arrive at
your doorstep in a matter of a few minutes.
What do you prefer more? Hopelessly chasing a taxi down the street or worse, waiting for one that will take ages arrive? Or instead, comfortably hailing a ride right from your smartphone?
Moreover, in states like New York City in the US, where ridesharing services are regulated, you will be provided with clean, well maintained, and insured vehicles from ridesharing/carpool companies. Additionally, these companies provide proper commercial insurance facilities as well.
As a requirement for using ridesharing services via apps like Uber, you will have to sign up and enter your credit card or PayPal information which will be used to make transactions for your ride.
This is beneficial for customers in a way that they will not have to go through the trouble of exchanging cash and haggling, or worse yet, trying to swipe their card in a machine which may or may not work and thus spending extra time on something that an app can do automatically. If you are in Uber or Lyft, the fare is usually deducted at the end of the ride automatically via the app, and an e-receipt is dispatched to your email inbox.
We live in an age where social proof is how we measure trust. Ridesharing apps like Uber give passengers and drivers the option to rate each other which in turn gives the ridesharing companies a comprehensive overview of the customer service delivered and consequently gives them ways to improve.
For example, unprofessional drivers, as well as drivers with consistently low ratings, are removed from the job. This, in turn, helps the ridesharing company to maintain appropriate standards of service.
Since drivers can log in and out of the app at liberty, they can strategically allocate their jobs as well as get rid of rude and aggressive customers. This can be done via the rating system available on the app.
Although ridesharing comes with several advantages, including being several times cheaper than taxis (in most cases), sometimes the fares fluctuate and increase tremendously especially when the supply of available drivers exceeds the demand of passengers.
This basically means that cab fares will increase depending on the time and demand. For example, fares will be much higher during peak hours, for instance, a passenger who used Uber told Chicago Tribune that she nearly passed out when she was charged $640 for a 30-mile airport ride. Furthermore, during such hours, drivers may even reject customer’s requests for rides which can be a hassle.
All US Android devices saw an increase in active Uber installation from 12.57% in June 2015 to 21.25% by May 2016.
Lyft may be smaller than Uber, but it is growing nevertheless. With its headquarters based in San Francisco, this ridesharing app allows users to conveniently connect with drivers to get to the required destination. But it’s most distinguishing feature, perhaps, is the unique pink mustache which is usually placed on the dashboard or front of its cars.
Additionally, Lyft offers a Lyft Line option for both shared rides and carpooling at the same time. Plain Lyft is for single travelers or small groups of up to four people, and Lyft Plus is for larger groups of travelers.
Moreover, the Lyft app saw an impressive increase in the download of its Android app installation, which grew from 1.22% in June 2015 to 2.19% in May 2016.
In case you are wondering how Uber and Lyft compare with each other, here is a
Carma is an app and web-based carpooling service which is active in several US cities.
According to Carma, “Shared car seats mean greener, faster, and more affordable commute.” Connecting both drivers and passengers traveling in the same direction, this app is aimed at slashing down ridesharing costs with each commute as well as promoting sustainability and encouraging commuters to become more sociable.
After the launch of on-demand transportation services provided by ridesharing companies such as Uber and Lyft, taxi operators did not just sit back with their thumbs crossed while miraculously waiting for the ridesharing phenomena to pass. At least some of them started to raise their standards by becoming more tech-savvy and embracing smartphone technology.
The following are the top three taxi apps in the U.S.:
Flywheel was launched in California and is one of the most popular cab hailing apps which connects users to available taxi fleets. As is the case with Uber and Lyft, passengers hail a cab using their smartphone.
However, Flywheel has not got its own fleet of vehicles but rather provides cabs from multiple taxi fleets. In cities like San Francisco where the company has a major dominance, more than 85% of cabs are linked to Flywheel.
This UK founded app dubs itself as “the world’s best taxi rated app.” It is available in a selected few cities in the US which include New York, Boston, Chicago and Washington D.C.
Hailing a cab in any of the cities mentioned above will be a swift process, thanks to the app which enables you to use your GPS to pinpoint your location and automatically connects you to “Hailo-enabled taxis” via the “Pick-me up option” on the app.
Curb, an American taxi app has also embraced technology, and you can use it to hail a taxi and pay for the ride using your smartphone.
You will be connected to licensed and fully-insured drivers who in turn will deliver you to your destination safely. Furthermore, you can also rate you ride and receive an e-ticket right after you pay up. You can also pay cash if you prefer.
Additionally, Curb also has the option to allow you to book rides for the future via the “Pick Me Up Later” feature.
This app is available in over 60 cities in the US including New York City and Washington DC.
The economic benefits of carpooling include the following:
Ridesharing may have worried taxi drivers, but it has also led to the creation of thousands of jobs. Uber’s CEO Travis Kalanick revealed in 2014 that the company was creating at least 50,000 new jobs per month. They’ve created stable and well-paying income streams for thousands of households via the attractive rates offered to drivers.
Furthermore, the company generates close to 2.8 billion per annum for the US economy alone.
Consumers are most likely to spend lesser amounts of money while commuting especially while using ridesharing.
Disruptive ridesharing and carpool apps like Uber and Lyft and Carma are cited by many as the future of transportation.
Not only are they hugely popular and expanding, but lots of new investors are expressing interest in owning shares in these carpooling and taxi app companies.
For example, most recently GM motors, one of America’s largest automobile manufacturer invested $500 million in Lyft.
Additionally, many other major car makers are investing in ridesharing/carpooling companies.
This works with carpooling and ridesharing companies since they are on the rise. Most offices and workplaces already have some kind of carpooling incentive in place, but it’s all set to get a tad juicier in the future.
Insurance companies are already slashing down insurance rates for carpool companies, and this trend is looking to improve and become more lucrative and economical in the future.
Because companies can save on parking fees and spaces, they will find the idea of having two or more employees commute in a single vehicle better and therefore will look to make carpooling and ridesharing a company policy.
It is not exactly known when autonomous vehicles will completely take over cars but that time is not far given that their production has already begun and they will soon be available to the public. For example, Uber’s first self-driving fleet is said to be arriving in Pittsburgh later this month.
This means that ridesharing and taxi companies in different countries will see a drop in the driver rate as autonomous cars gradually make a strong foothold in the economy.
But given how a Tesla car was involved in a fatal crash while being on autopilot shows it will be a while before we see taxi drivers and Uber drivers letting go of past differences and joining hands to protest against robots.
In the near future, it will be common for carpooling and ridesharing companies to introduce a feature whereby long shared rides will be broken down into a series of smaller linked trips instead of single long one.
For example, one could ride from one town to the airport, and then to one’s final destination all via interconnected shared car pools.
While we have seen the rise of apps, which make commuting a piece of cake, we can’t wait to watch how we can better interconnect via the internet and mobile in the future.
Now over to you. What do you think of the battle between taxi vs Uber and Lyft? Will ridesharing services be able to sustain themselves and take over the remaining market share? Let us know your opinion below!