‘Partly Cloudy’ Sky For Uber?
The Ride-hailing giant has been facing challenges across some of its major markets recently. While growth has improved, it reported a loss of $1.2 billion in the third quarter of 2019.
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Off-late, the app-based ride-hailing giant, Uber, has been facing rough weather around some of its major markets. Recently, Uber was banned for a second time in London when TfL (Transport for London), the transport authority banned the taxi service because of concerns of customer safety. Again in New Jersey in the United States, Uber was presented with a bill in excess of $500 million for misclassifying its drivers as independent contractors instead of employees, thereby benefiting financially as asserted by the state’s labor department. Uber has previously faced challenges in the Asia Pacific region as well. And in India, news reports suggest that the central government is said to be planning to cap the commission charged by the cab aggregator among a host of ‘dos’ and ‘don'ts as it finalizes the upcoming rules for taxi aggregators currently under discussion.
On the business side too, the company appears to be taking a toll. The financial results for the quarter ended September 30, states that while the gross bookings grew to $16.5 billion (representing 29% year-over-year growth) the net loss was reported at $1.2 billion.
In addition to these concerns, cities across the globe are levying congestion taxes on ride hailing services in the face of growing concerns over the environment, which will see rides becoming more expensive for consumers affecting Uber and other ride-hailing services. Further, there are cities where minimum wage requirement for drivers of ride-hailing services have been instituted, which could require a re-look by these companies into their employment contracts. As the sector gets more organised and states put in more regulations, it appears that all app-based operators may be required to fine tune their operations.
The 2019 Deloitte Global Automotive Consumer Study (Asia Pacific) found that the number of people reporting regular usage of ride-hailing has decreased in the last two years by 21%. The report also states that Gen Z (51%) might be more inclined towards shared mobility. Definitely a viable option if users are looking for not just convenience but cost effectiveness also.
In a bid to drum up growth, it has been noticed that ride-hailing companies are expanding their bouquet of services to include bike taxis and rentals, freight shipping, corporate tie-ups, self-drive options, financial services, and cloud kitchens.
In regard to the future of ride-hailing services in India specifically, Sameer Wadhwa, Partner Deloitte India stated, “ride-hailing services will see a growth in the mid-term. Since penetration in Tier 1 cities is saturated, growth will come from value added services like cloud kitchens and delivery etc. Focus on aspects such as security and comfort are key. For Tier 2 cities growth in the sector will be from two wheelers and autos.”
What Happened in London, New Jersey?
All is not rosy for Uber. Recently, the company was banned for a second time in London this November. Transport for London, the transport authority, banned the taxi service because of concerns of customer safety. As per reports, vulnerabilities in the App let unauthorised drivers conduct close to 14,000 trips and in some cases fake accounts were created by banned drivers. It was further reported that in fact, one of the banned drivers had previously been cautioned for circulating indecent images of children. London is an important market for Uber, and as a result of the loss of its licence its shares took a beating. CEO, Dara Khosrowshahi tweeted, “We understand we’re held to a high bar, as we should be. But this TfL decision is just wrong. Over the last 2 years we have fundamentally changed how we operate in London. We have come very far — and we will keep going, for the millions of drivers and riders who rely on us.”
Uber has been facing challenges in New Jersey as well, where it was presented with a bill in excess of $500 million for misclassifying its drivers as independent contractors instead of employees, thereby benefiting financially as asserted by the state’s labor department. The company it has been reported will be appealing these decisions.
There are a number of positives too attached with Uber. For example, in October, Uber launched an on-demand staffing business-Uber Works in Chicago. This platform connects workers with businesses that need to fill available shifts. Of course, we know of Uber Air, the flying taxis, which will first fly in Dallas, LA and Melbourne in 2020 with commercial operations beginning in 2023. In India, it has provided livelihood to a large number of people and in the process presented a viable alternate to public transport, especially in bigger cities and towns.