Ride Sharing Creates Turmoil For Car Service Businesses

Jun 7, 2013

You may have seen cars driving around the Seattle area with oversized, hot pink moustaches on their front grills. Those moustaches are trademarks for a new car service company called Lyft, one of several ride-sharing services now operating in the city. Think of them like Airbnb, but with a car and a driver. Lyft, Uber X and Sidecar allow laypeople to use their own cars and act as cabbies. The services are expanding in Seattle, and they’re drawing increased scrutiny from the cab industry, as well as from regulators and policymakers. Some officials say the businesses are illegal.

Just like all aspects of the shared economy, from Airbnb to Zipcar, we're looking to share resources that we already have, to make people's lives more efficient and more fun.

Sidecar started operating in Seattle last fall, followed by Lyft this past spring, and a third company, Uber, has launched a similar ride-sharing service called Uber X. These companies are also taking off across the country, filling a niche for on-demand rides.

The services are based on smartphone apps. Riders download a company’s app and create an account with their credit card information. When they want to book a ride, they start up the app and their phone will indicate how many drivers are nearby and how long it will take to get picked up. Once a ride is reserved, the app shows the user a picture of the driver, and a description of the driver’s vehicle. At the end of the ride, most of the services suggest a donation that’s split between the company and the driver. But riders can adjust the donation to any amount, including nothing.

For a driver, it’s a way to make some money off of a  car--an asset that’s depreciating. Seattle resident Curtis Lui has been a driver for Sidecar since last December. He said he enjoys meeting new people. “The funniest moment I had was when I got some fast food for somebody,” he said. “It was 2:00 at night and they had been drinking quite a bit.”

Riders like the convenience and say the rides can be more enjoyable than a typical cab ride. Often, passengers ride in the front seat, as if they were getting a ride from a friend or a neighbor. Some drivers will offer snacks or even let the passenger operate the radio. The companies market themselves as a type of social network that helps the environment and the local economy.

Alex Lachance, city manager for Sidecar’s Seattle operations, said they’re trying to bring people together. “Just like all aspects of the shared economy, from Airbnb to Zipcar, we’re looking to share resources that we already have, to make people’s lives more efficient and more fun,” she said.

Critics, though, are concerned about the lack of regulation. In the city of Seattle, cab drivers either need a cab or a for-hire license in order to pick up passengers. But drivers with Uber X, Lyft and Sidecar often do not have such licenses, and the city doesn’t inspect their vehicles or their insurance policies.

The companies all say that safety is their top priority and that they conduct these checks on their own. But officials remain skeptical and want to learn more.

Meanwhile, cab drivers argue that the new companies have an unfair advantage because they’re not complying with the existing car-service rules.  Samatar Guled runs a for-hire car service. During a recent city council meeting he laid the blame for the competition at the feet of city officials. “This whole industry is collapsing and the city is acting like nothing is happening.”

Some professional drivers, like Guled, want the city to issue more cab driver's licenses, something it hasn’t done in about two decades. They say the new ride-sharing companies are exploiting unmet demand for more car services, a need that wouldn’t exist if the city had allowed more cabs to be on the road.

The city has been reluctant to issue more cab licenses. Denise Movius, deputy director with the city’s Finance and Administrative Services, said the city hasn’t received any evidence that more licenses are needed. “What we are trying to guard against is putting too many new cars out there that would affect the income of the drivers who are already there, because the drivers that are out there now, are barely making a living wage,” she said.

Movius concedes that officials need more information about whether there is a need for more car services and more commercial licenses. That’s why the city has hired a consultant to take that up.

A report is due out later this year. After that it will be up the city council to decide whether it should step in and issue more regulations and possibly more licenses. Until then, expect to see more cars with pink moustaches on a street near you.
 

RELATED LINKS:

Seattle City Council’s overview of the taxi cab industry

Seattle City Council's briefing on ride sharing services