Ride Sharing Capped in NYC
October 18, 2018
In this episode of TechTalk, we look at New York City’s proposed annual cap on the number of ride-sharing vehicles, such as Uber and Lyft. Learn who the winners and losers are, the cap’s scope, as well as the larger implications for this unique urban initiative.
DP: Dave, tell us about this interesting development in the gig economy.
DK:The New York City Council approved a one-year moratorium on the number of new licenses for vehicles for hire so that the city can study the issues involved. The cap would be vehicle-based, not driver-based.
DP: And what brought all this about?
DK: It’s seen as a way to ease congestion in Manhattan, which is a big problem that many people experience on a regular basis. There’s been talk of having congestion-based pricing for entering certain parts of Manhattan for years now. It's a model that London uses somewhat successfully, but it hasn’t gained any real traction here. A cap is not a cure-all, but it could certainly help. Another reason is a nod to the taxi industry, which has taken a big hit with the advent of ridesharing services. For example, a taxi medallion worth $1.3 million in 2013 is worth about $150,000 today. You could also argue that the city's public transit system is losing money, in part, due to these ridesharing services.
DP: This isn't the first time New York City tried a cap, is it?
DK:No, it tried back in 2015, but Uber successfully lobbied to defeat the measure.
DP: To help put this in some context, how many of these vehicles are out there.
DK:There's somewhere in the neighborhood of 14,000 cabs in New York City. By comparison, there's approximately 100,000 ridesharing cars, which is up from 63,000 in 2015. So you can see why there are issues with both congestion and competition.
DP: There is a wrinkle in the New York City Council bill that’s a win for the ridesharing drivers, isn't there?
DK:Yes. This bill would give them a minimum wage of $17.22 per hour.
DP: What's the bigger picture here?
DK:If it comes to pass, and if it's even moderately successful, it's a model that cities across the U.S. may adopt. So you have a lot of city councils interested in the outcome.
DP: Give our listeners some of the unique challenges and opportunities for you, as a business advisor, when it comes to working with people in the gig-based economy.
DK:I seem to mention it every month, but the first thing that comes to mind is business valuation. How would something like this impact Uber's valuation, its ability to raise money? Likewise, what loopholes will be created when something like this goes into effect? If something like this does go into effect, the new revenue recognition [FAS VAC 606] will certainly impact these types of companies. For those who don't remember, in 2017 Uber alerted shareholders that the change could cut revenues in half. So, across the board, there’s certainly a potential impact there. And just one more thought is pricing. When you have a new regulation like this, how does that impact how a company should price its services?
DP: With a 100,000 rideshare cars in New York City, that represents, essentially, a lot of small business owners. So Dave, thanks for your expertise and this great insight.
DP: And thank you for listening to The Dave and Dave Show as part of the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics, and join us for our next EisnerAmper podcast when we get down to business.