Did Lyft just admit it's a taxi company after all? Ridesharing companies pretend to be tech firms. They're not.
Recently Lyft and General Motors made a grand announcement, with all the hoopla meant to convey that this announcement is a really big deal: ta-daaaa, a joint partnership in which Lyft will develop self-driving cars with GM. GM is going to invest $500 million in Lyft, and GM president Daniel Ammann will join the board of Lyft. Never mind that self-driving cars (beyond test cars) will not appear on the streets anytime soon – and possibly never, due to the severe regulatory and insurance hurdles involved in letting a 3,000-pound machine steer itself with no human at the controls. Nevertheless, that big headline dominated the news cycle, which is so titillated by anything Uber or Donald Trump.
Yet the media missed the really big news. It was tucked into the Lyft-GM announcement as a little nugget that no one paid attention to. As reported in the Times:
“G.M. will also work with Lyft to set up a series of short-term car rental hubs across the United States, places where people who do not own cars can pick up a vehicle and drive for Lyft to earn money.”
Stop the presses; say what? Lyft will rent cars to its drivers? As in, instead of a driver bringing their car to Lyft for rideshare profiteering, Lyft will own the cars and provide them to drivers?
Apparently so. Lyft president John Zimmer told CNBC “We have thousands and thousands of sign-ups from individuals whose cars don’t qualify, and so we can now market to those individuals who already applied but didn’t have the right car. This is a really great income opportunity, whether or not you have a car.”
OK…but…how…is that…any different from…how a taxi company operates? In most taxi companies, a driver pays a “gate” to a taxi company to rent its taxi for the day or evening. The driver keeps the net of his fares after paying the rental gate, which is usually around $100 per shift. The new Lyft-GM business model sure sounds like a taxi company to me.
In case the import of this still isn’t clear, I’ll spell it out: one of the big claims of Lyft and its other ridesharing competitors, like Uber and Sidecar, is that the reason they should not have to follow the considerable regulations that govern taxi companies is because Lyft/Uber are not in fact taxi companies. According to their view of the world, they are a technology company. They only connect a driver with a passenger as an intermediary; they are a mere software broker of a deal between two separate parties, and so they shouldn’t be regulated like a taxi company.
Look, they have said repeatedly, we don’t even own any cars…so how can we be a taxi company? In fact, Uber changed its original name, which was UberCab when it was founded by Travis Kalanick and Garrett Camp in 2009, to Uber Technologies to provide that regulatory cover.
Regulators in the United States have mostly swallowed this ridesharing whopper, hook, line and sinker. They have treated these companies by a different set of rules than taxi companies. As one obvious example, in most cities the number of taxis roaming the streets is limited by a medallion system. The rationale for limiting the number of livery cars is to keep congestion manageable and the wages of drivers high enough to make some kind of living. But Lyft and Uber have refused to accept any limits on their number of drivers (and hence, notice how the streets in so many cities are now increasingly congested – just a coincidence?).
In addition, Lyft and Uber – ahem, the technology companies – have refused to pay livery taxes and other fees that taxi companies must pay to local governments, which are an important source of municipal revenue. In New York City, for example, taxis pay a fee that helps support mass public transit; Lyft and Uber refuse to pay any of that.