San Diego cab companies insist they aren’t losing customers to the mobile rideshare app Uber. But they are losing money because of it.
The cash is following cab drivers, who are making the jump to Uber in droves.
“I don’t have a customer problem. I have enough customers to fill these cabs everyday,” said Anthony Palmeri, who owns taxi dispatcher Yellow Radio Service. “My owners don’t have enough drivers to drive the taxicabs, so the cab sits idle.”
The people who own cabs, and the city permits to operate them, often don’t make their living from actually picking up passengers. Their income comes from leasing the vehicles to drivers, who pay them an average of $400 a week and take home whatever profits are leftover.
Palmeri said between 30 and 50 of the 255 cabs on his roster currently aren’t in service because their owners can’t find people to drive them. An organizer with United Taxi Workers of San Diego, an association representing lease drivers, said about half of the organization’s 700 members are now driving for Uber, at least part time.
The trend hasn’t impacted taxi service levels, Palmeri said, but it does mean cab owners aren’t seeing their usual income from monthly lease payments. And if driver flight does slow cab response times, customers could start fleeing to Uber, too.
Christopher Ballard, Uber San Diego’s general manager, said there are now well over 1,000 Uber drivers in the region, including Tijuana as of last week. Indeed, the app’s GPS map is crawling with sometimes dozens of ant-like car icons representing drivers in your neighborhood, and they can typically get to you in about four minutes, Ballard said.
The convenience is winning over tech-savvy millennials. But it’s time that won over former taxi driver Abdulhamid Somo. He drove a cab for 20 years before making the switch to Uber.
“I have four little kids, which say when I go to work, ‘Dad, don’t go! Don’t leave us! Stay with us!’” Somo said. Under Uber, he’s been able to stay home with his children during their summer break. He’s been working Friday through Sunday. He clocks in by turning on his app, and he can drive as often or as little as he’d like.
“Nobody forces you to work with the Uber,” Somo said. “But if you drive a taxi, you have to drive 30 (days a month) or 365 days yearly. Even if you’re sick, you have to pay a lease with the taxi company.”
To be clear, though, working every day is not written into taxi contracts. But cab drivers say their leases cost so much, they have to work that many hours to take home even a little money.
With Uber, Somo drives a black Lincoln Town Car he leases from a limo company. Uber drivers can use their own vehicle or, like Somo, work with a luxury car service that allows drivers to pick up Uber calls. Uber handles the app and insurance.
Compared to the average $400 weekly lease for a cab, the Town Car runs Somo about $190 a week. With the lower overhead, he has the potential to make more money, even after Uber takes its 20 percent cut.
In contrast, taxi owners take a 40 percent cut via their leases. That’s according to a San Diego State University study that found the taxi drivers they interviewed were making $4.45 an hour after paying for leases, fuel and other expenses. A study commissioned by the Metropolitan Transit System this year contests that, saying full-time lease drivers make $16.50 an hour.
Uber came to San Diego in 2012, right before drivers’ calls for taxi industry reform went public. The city is still piecing together that reform. Meanwhile, Uber has already ushered in change.
“I just went downtown and I asked a (taxi) driver and he said, ‘Uber’s one of the best things that ever happened. My lease rate went down,’” said Sarah Saez, an organizer for United Taxi Workers. “I think there are a lot of drivers in the taxi industry who are welcoming the competition, because it’s the first time that permit holders in the taxi industry are actually trying to improve it, again, by lowering leases, by treating their drivers better.”
Ben Seifu leads another organization for drivers, United Taxi Operators. He and his colleagues have written an extensive policy recommendation on the taxi industry and given it to city leaders. He said Uber beat city officials to the punch.
“Everything that UTO was basically proposing, it’s being implemented at Uber. It’s like they copied and pasted our two policies that we submitted to the city as far as the age and mileage of the vehicles, as well as the fact that everyone is truly an independent contractor,” Seifu said. “(Uber drivers are) the true form of independent contractor, where you have 100 percent control over your income or how many hours you work.”
Seifu wants cabs to be newer – Uber requires its vehicles be a 2008 model or newer – and to abolish the city’s permitting system, which has moved to a shadow market that largely shuts out lease drivers who want to start their own taxi businesses.
Now, former cab drivers are finding that opportunity under Uber. Saez said some former cab drivers are buying up fleets of black cars and leasing them out like their former bosses.
They’re able to create this sort of replica taxi industry because Uber doesn’t need those pricey city permits to operate; it answers to the California Public Utilities Commission.
And while Uber doesn’t necessarily advocate for a leasing system – its leaders are quick to distance themselves from the transportation side of things, calling themselves “tech workers” and their drivers “partners” – it is working with banks and car dealerships to help prospective drivers finance new vehicles.
“That’s a big reason why individuals will make the switch from being former taxi drivers to really being entrepreneurs and owning their own small businesses, because they don’t have a daily lease payment,” said Ballard.
But this is where Uber begins to look less rosy. Saez said some drivers are making the investment in new cars and then having their apps shut off. They can’t work to pay it off.
Uber asks drivers and customers to rate one another to ensure a good experience for both parties. If drivers get low ratings (Saez said a 4.6 out of 5 stars is considered too low, but Ballard said the threshold varies) Uber deactivates their profiles until they complete a special course. Saez said that’s putting someone’s livelihood into the hands of very inebriated individuals. People often need a ride because they’re drunk, but that means they might not be able to provide a clear-headed review.
“We’ve had drivers who said, ‘My customer said I have too much cologne on so they gave me a bad rating.’ Or drivers have a lot of problems with people on Friday and Saturday nights and they’ve been drinking they think one star is like, ‘You’re No. 1,’” Saez said.
Ballard said he takes that into account and won’t deactivate someone for one bad rating.
Saez said United Taxi Workers is willing to help drivers work out their concerns with Uber. The organization isn’t technically a taxicab union because its members are independent contractors, many who now drive for Uber. Meanwhile, cab companies have a much longer list of complaints stemming from the lopsided regulation of rideshare businesses, which the CPUC classifies as transportation network companies.
“People think that we don’t want TNC’s here and that’s really not the truth,” said Palmeri. “We have always been a business that has another form of competition. But if it looks like a duck, if it walks like a duck, if it talks like a duck, it’s a duck. And treat it as a duck. I mean I can call it a technology company. It’s a duck. It’s taking people from A to B.”
Again, Uber doesn’t have to get pricey city permits to operate for-hire vehicles in the city, nor does it have to outfit cars with the same meters and special signage MTS requires in cabs. Uber doesn’t have to follow local stipulations that ensure cabs are available to seniors and residents in unsafe or less-profitable neighborhoods. And while Uber drivers who use personal vehicles aren’t licensed to pick up passengers at the airport, Uber is in talks with the airport about loosening its policy.
But Palmeri said his biggest concern is customer safety. Taxi drivers must pass a background test through the Sheriff’s Department, cabs must carry insurance that will cover up to $1 million in liability costs and the vehicles must go through an annual inspection with MTS. He said he’s not satisfied by the CPUC’s safety regulations and doubts the department can adequately protect consumers without a local office and with a rideshare policy that’s less than a year old.
Ballard said the idea that rideshares aren’t safe is a myth. The state requires all Uber vehicles to go through a certified inspection and that all drivers have their backgrounds checked (Uber’s is pretty extensive).
And Uber cars leased from limo companies already have at least $750,000 worth of coverage. Uber insures drivers’ personal cars for $1 million while they’re driving customers and offers backup coverage if their personal insurer denies coverage for incidents that happens when the app is on. A state bill would require the insurance from the moment a driver turns on the app and is “on the clock.” Another would formalize driver screenings.
Councilwoman Marti Emerald has hinted at plans to explore leveling the playing field locally. But she said addressing issues for cab drivers comes first.
“A lot of our taxi drivers who went to Uber are saying, ‘If the taxi industry is fixed, we’ll come back to the taxi industry,’” Saez said. “I’ve had more than a handful of drivers who are like, ‘My heart is in the taxi industry but this is a better opportunity for me right now.’”
Video by Brian Myers, Media Arts Center San Diego