Screen Shot 2015-03-24 at 10.41.14 AM

How Uber and Lyft cost Philly cabbies thousands and tempt them to switch sides

Seven years ago, Hichen picked up everything he owned and moved from Morocco to Northeast Philly in search of a better life for his family. Three years later, he leased a taxi medallion, bought a cab and started what’s become his typical workday: 10-hour shifts, his proven way to turn a profit.

But those profits have drastically decreased since October when UberX launched in Philadelphia. The low-cost ridesharing giant has bled tech-savvy clientele from cab drivers across the city, and Hichen, who declined to give his last name because he wasn’t authorized to speak about the topic, says the number of calls coming into cab companies to pick up riders has been on a downslide since UberX launched. He used to pick up riders who called in Fishtown and Fairmount all the time — now the only time he picks up riders in areas with large, young populations is when they flag him down.

The financial impact is obvious. Hichen estimates he’s lost about $40 a day since UberX launched — that’s at least a typical loss for cab drivers in recent months (and it can reach $75 on a Friday night), according to Ronald Blount, president of the Taxi Workers Alliance of Pennsylvania. Added up, that’d be about $10,000 a year.

“UberX, it’s just with their private cars, just for extra money,” says Hichen. “This is my entire job. I have to work 10 hours a day, six days a week to actually make money past expenses.”

Sixteen-hundred cabs are licensed to operate in Philadelphia and until a few months ago, they’d had little to no competition. The medallions required to operate cabs were selling for more than $500,000. Then in October, UberX’s launch threw the transportation ecosystem into disarray. Now cabs must compete with about 2,500 Uber Black and UberX vehicles, not to mention the entry of Lyft into the market in late January. It’s like this everywhere. New data released this month showed that in New York City, Uber cars have for the first time outpaced the number of the yellow taxis.

In this business environment, cab drivers like Hichen have a pretty strong incentive to switch to Uber or Lyft. Owners of cab medallions worry about the prospect of defaulting on their loans for expensive cab medallions, as the market price for those once-lucrative items nose-dives.

Taken together, the cab industry is facing a crisis unlike any it has faced before.

With profits dropping and the likelihood of Uber and Lyft getting more popular among consumers, the question arises: Why would someone like Hichen continue driving a cab?

Some drivers certainly feel that way. Blount estimates about 10 percent of taxi drivers have left the job to work for Uber either part-time or full-time.

The appeal is obvious. To work for UberX, a prospective driver needs a 2005 or newer four-door car, insurance and the completion of a background check. Cabbies must either lease or buy a taxi, get a special license and insurance, complete a background check and either work for a company that has a medallion or lease or buy a medallion.

Anyone who switches to Uber or Lyft joins a market that seems far from saturated. Washington, D.C., a smaller city but with a larger tourist population, has more than 10,000 UberX and Uber Black drivers (more than four times Philly’s total) and about 6,300 taxis. The only real drawback of switching to Uber for a driver who isn’t saddled with his or her own cab is risking the ire of the PPA and its faithful horses.

“There’s no one to write you a ticket,” Blount says. “No violations.”

With about 800 taxis, 215-Get-A-Cab — the company Hichen drives for — is the largest operator in Philadelphia. Spokesperson Danielle Freidman maintains that 215-Get-A-Cab’s business has not been greatly affected by UberX in terms of driver attrition or revenue. A driver for 215-Get-A-Cab echoed this claim, saying his business had remained steady. He says he sees fewer young, technologically-advanced riders but still attracts an older, less tech-savvy crowd.

Though 215-Get-A-Cab claims minimal effect from ridesharing services for the purposes of this article, it’s the lead plaintiff in a lawsuit against Uber. The 45 companies claim the ride-sharing service is unfairly competing and that it has caused irreparable damage by decreasing the value of a medallion. Medallions that sold for $545,000 not long ago failed at auctions for $475,000 and $350,000 and are now being set at a minimum price of $50,000.

The plaintiffs’ attorney, Michael Henry of Salaman, Grayson & Henry, says most medallion owners bought their medallions with loans. When their value decreases, the owners face the prospect of defaulting. Gene Freidman, who owns more than 900 New York City cabs and co-founded Philadelphia’s Freedom Taxi, recently defaulted on at least 90 medallions in New York, according to the New York Post.

Henry says that while medallion owners face the largest loss particularly in the long term, cab drivers are likely also having trouble now.

“If drivers are losing money, they’re going to be the first ones to suffer,” he says. “And if they lose money, they may find other employment or move to ride-sharing services in order to make more money. It’s kind of of a trickle-down effect. It will eventually affect the medallion owners.”

That was the case with Freidman in New York. An industry source told The Post Freidman was losing money because he couldn’t find enough drivers.

Rather than help cab drivers and medallion owners, Blount says the PPA has been doing the opposite. This month, it proposed requiring all new cabs to have less than 500 miles on them and to be wheelchair accessible. Blount admits the improvements are necessary, but the cab drivers will bear some of the expenses.

“They’re trying to make the taxi industry better, but it’s increasing costs,” Blount says. “A taxi driver used to spend about $10,000, and now (it’s like), ‘they want me to spend $40,000. I might as well spend $20,000 and drive for Uber.’ A lot of drivers are saying that.”

Fewer drivers means fewer rides, particularly for the the 38 percent of Philadelphians who don’t own smart phones. Blount says in the summer about a quarter of all drivers take long vacations to visit home countries. Add the drivers lost to Uber, and he predicts cab companies will be scrambling.

Hichen says while many of the cab drivers he knows have jumped ship to Uber Black and UberX, he’s sticking with his cab for two reasons 1. Because he owns his taxi and 2. On principle.

“Drivers should have a certificate, not be a person with a private license,” he said. “UberX is any person. It’s good for them to make extra money, but the effect on us, the taxis, it’s terrible.”

×
×

Follow this story

×

Success! You're now subscribed to “Ride-sharing in Philly”

You'll get emails from Billy Penn as this story develops. You can unsubscribe in every email.