No wonder taxi companies are fighting Uber so fiercely — the arrival of the app is destroying the value of taxi medallions, according to Jefferies analyst Chief Global Equity Strategist Sean Darby and his team.
In city after city, taxi lobbyists have urged municipalities to restrict or ban the app, largely by enforcing laws that only let licensed (or “medallion”) drivers offer rides for money.
Taxi licenses, or medallions, create local taxi cartels or monopolies. The medallions themselves often trade at auctions for up to $US1 million.
London taxi drivers have staged protests against Uber (which have served mostly to publicise Uber). Their lobby group also filed a lawsuit. In London, only drivers who have passed an extensive geography exam called “The Knowledge” can drive a black cab. Uber, by contrast lets anyone with a car and a GPS device become a driver, drastically lowering the barrier to the industry. Generally, Uber’s service is cheaper than a local taxi. And because Uber places a high emphasis on customer service, the drivers are often nicer, too.
Basically, Uber’s entire business model destroys taxi cartels and monopolies, in theory at least.
Uber is still rolling out in the UK — it’s only available in London, Leeds, Manchester and Birmingham right now.
Birmingham taxi drivers are apparently not bothered about Uber, yet. They might become more bothered when they see what Uber has done to the price of medallions in New York.
According to Jefferies, prices of medallions in New York — home of the fabled $US1 million medallion — have fallen 20%:
We had previously reported that medallion prices had fallen 17% in 2014. It looks like medallion equity (usually traded privately at auction) is falling even faster this year.