Tuesday, May 24, 2016

How Governmental Regulations on Lyft & Uber Are Affecting Other Rideshare Companies

Minature toy taxi

Once young upstarts in the ridesharing community themselves, companies Uber and Lyft have in recent years seen a wave of backlash directed at them. Originally and primarily from taxi companies, they've also seen a rash of government enforcement of regulations that have effectively crippled the ridesharing services' ability to offer rides to people in certain communities. In the city of Austin, Texas, for example, both Uber and Lyft ride-sharing services have stopped operating after voters in the usually liberal city rejected a ballot measure that would've allowed the companies to regulate themselves. The vote had 56% supporting tighter regulations, with 44% opposed. Austin's mayor had this to say on the matter:

 "The people have spoken tonight loud and clear. Uber and Lyft are welcome to stay in Austin, and I invite them to the table regardless. Austin is an innovative and creative city, and we'll need to be at our most creative and innovative now."

Increase in Governmental Regulations

 But despite this statement, Uber and Lyft would, under the new regulations, effectively have to switch their business model toward something more akin to taxi services. And considering that what primarily differentiates them in the field is the way that they differ from taxi services, the mayor's point is largely a moot one.

Riding off of this wave of a weakening Uber and Lyft due in large part to growing levels of government interference in the form of regulation, Google is capitalizing with their own ridesharing service, also known as Waze. Charging users just $.54 a mile for its carpool service, it seems Google is planning to undercut the otherwise unstoppable ridesharing giants, Uber and Lyft, and is doing so by undercutting price points that were themselves basically ways of undercutting the taxi cab industry. It remains to be seen if Waze will be hit by the same regulation.

Shift in Power

As you can see, ridesharing behemoths Uber and Lyft have in recent years had their status of being able to operate largely without regulation challenged by government entities, such as those in the otherwise progressive and relatively liberal city of Austin. While traditional taxi services can now capitalize on this reversal of power and influence, it seems more likely that other ridesharing services such as Google's Waze, and perhaps even smaller ridesharing companies, some of whom are just now popping up, will be the ones that will take advantage of this shift in power the most.

David Milberg is an investment banker in NYC.


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