The company has agreed to list all New York City taxis on its app, an agreement that could alleviate the ride-hailing giant's driver shortage and temper high fares while directing more business to cabdrivers, whose livelihoods have been harmed by the rise of car-sharing apps and the pandemic.
While Uber has formed partnerships with some taxi operators around the world, and riders in several U.S. cities can use its app to book taxis if cabdrivers choose to be listed there, the New York City alliance is the company's first citywide partnership in the United States. For years, New York, one of Uber's most profitable markets, has been a battleground for the company and the city's iconic yellow taxis.
"It's bigger and bolder than anything we've done before," said Uber's global mobility chief, Andrew Macdonald. Riders will be able to use the service later this spring, according to the company.
As part of the agreement, licensed technology partners of the New York City Taxi and Limousine Commission will integrate their taxi-hailing apps' software with Uber's. According to Uber, these apps, developed by Creative Mobile Technologies and Curb Mobility, are used by the city's approximately 14,000 taxis. Both companies accept credit cards in taxis and operate the screens that show weather, news, and advertisements to passengers.
According to the company, passengers will pay roughly the same fare for taxi rides as they will for Uber X rides. The TLC establishes a minimum time and distance rate for Uber drivers in New York City. According to Uber, its drivers typically earn more than that rate. Cabdrivers who agree to pick up Uber passengers will be compensated in the same way.
The yellow-cab metered rate is calculated differently, which means taxi drivers can earn less, the same, or more on an Uber ride depending on the nature of the trip. Unlike Uber drivers in New York, taxi drivers will be able to see expected earnings before a trip and decline rides they don't think are worth their time, according to Uber.
The fare will be split between Uber and its taxi partners. The companies refused to disclose the terms. In the fourth quarter, Uber's average global take rate for rides was 20%.
In pre-market trading, Uber shares rose 5.3 percent to $34.80 after The Wall Street Journal reported the deal.
The collaboration is a departure for Uber. Having once vowed to disrupt the taxi industry in the United States, it is now betting that traditional taxis will power its next wave of growth. Uber hopes to have every taxi in the world listed on its app by 2025. "It's certainly ambitious," Mr. Macdonald admitted, "but I certainly believe it's doable."
Meera Joshi, the TLC's deputy mayor, stated that the alliance creates economic opportunities for taxi drivers "without adding more and more cars."
"The word 'disruption' was almost in some ways a superficial word," Ms. Joshi, a former TLC commissioner, said. Uber modernized the taxi industry, lowered entry barriers, and conditioned riders to expect service at the touch of a button. However, it did not kill taxis or change the fundamental nature of the service, according to her.
For years, taxi associations fought Uber. Unions and lobbyists for major taxi companies were behind court cases in many countries that banned the app. Regulators slammed the company's gig-worker model. Taxi drivers in major European cities such as London, Paris, and Rome have occasionally snarled traffic in protest of Uber.
To save its business in some overseas markets, the company formed alliances with taxis, but doubled down on that strategy once it became a growth engine. Uber's efforts to entice taxi drivers were aided by the pandemic, when drivers' mainstay street-hailing business dried up. According to the company, more than 122,000 new taxi drivers were added to its app last year, which is four times the number that will be added in 2020.
In Barcelona, for example, Uber ceased operations after the city government imposed a rule requiring ride-hailing drivers to wait 15 minutes before picking up passengers. Following the use of that model in Madrid, Uber returned to the city last year after a two-year hiatus with several hundred taxis on its app.
When a rule requiring drivers to obtain taxi licenses restricted Uber's business in Austria last year, the company turned to recruiting taxis. According to the company, a recruitment push has signed up more than 2,000 taxi drivers in the country, making it one of Uber's largest overseas taxi markets.
Uber last year acquired a popular taxi-hailing app in Hong Kong, where taxis are a cheaper and more convenient option for commuters, bringing thousands of city taxis into its fold.
Uber stands to benefit in ways other than its ride-hailing business. According to Mr. Macdonald, 35% of people who started using the app to hail taxis went on to use other Uber products, such as its food-delivery service.
The pandemic hit the taxi industry hard, and drivers want to maximize their earnings to compensate for their losses, according to Ron Sherman, CEO of Creative Mobile Technologies, one of Uber's New York City partners.
The Uber alliance allows drivers to secure a return passenger on trips outside of Manhattan, where they frequently return empty, he said, which is especially painful as gas prices rise. Mr. Sherman's company has a taxi-hailing app called Arro, but its user base, he claims, is insufficient to compete with Uber's.
Meanwhile, Uber does not have enough gig drivers in the United States. During the health crisis, they turned to other jobs such as food and grocery delivery, and the resulting shortage drove ride prices to all-time highs last year. Drivers are gradually returning, but riders are returning faster, according to Uber and competitor Lyft Inc. Their ride prices have dipped from last year's highs, but they were still 17 percent higher on average last month than in January 2021, according to market research firm YipitData.
"They have demand, and we have supply," Mr. Sherman explained. "Uber needed more supply," he explained, so "it made sense for us to start talking about a partnership."
Mr. Sherman's company was approached by Uber last year to inquire about running advertisements on the roofs of taxis. In recent years, Uber has begun to install in-car tablets and rooftop TVs to broadcast a variety of advertisements.