LONDON — Is Uber destroying the car business?
We have known for a while that Uber is destroying the taxi business. And you have probably heard your city-based friends wondering whether they can rely on Uber instead of buying a new car.
Now we are seeing anecdotal evidence that Uber may actually be reducing the total demand for new private cars. Uber might be doing to cars what the internet did to newspapers, in other words.
Here is what we are seeing:
- The UK car industry just entered a marked slump even though the economy is buoyant. Car production dropped 10% last month, of which production for domestic drivers dropped 8.1%, according to the Society of Motor Manufacturers and Traders.
- Private new car registrations in the UK fell 14.0% year-over-year in May; year-to-date registrations are down 4.2%.
- The growth in UK consumer auto financing has gone into a sharp decline, even though other forms of consumer credit are still rising.
- A survey by YouGov found that 43% of Londoners believe app-based ride sharing is a genuine alternative to owning a car. And 22% of Londoners who own a car would consider not owning one in the future if Uber service became easier.
There are knock-on effects in other industries, too.
- Driving schools that teach “the knowledge” to London black cab drivers have begun to close because there is no demand for them in a world where anyone can drive for Uber using turn-by-turn directions on a phone.
- In New York, the price of taxi medallions — the licence any yellow cab needs to operate — fell on the open market from $US1.05 million in 2014 to $US241,000 this March. That’s a 77% decline.
- In Chicago, taxi revenue has fallen by 40% over the past three years and 42% of cabs in Chicago aren’t even operating, according to a study by the city’s taxi driver union
- The stock price of Medallion Financial Corp, which provides financing for taxi drivers in the US, has declined to $US2.31 from a recent high of $US17.74 in 2013.
Since the widespread arrival of Uber, all these indicators are heading south. There are currently about 40,000 Uber drivers in the UK. The UK car industry makes about 150,000 cars a month for domestic consumption, so the available supply of Uber drivers is equal to about 26% of the output of new cars. That compares apples to oranges of course, because one Uber driver can ferry multiple passengers.
None of this is proof. But it is tough to see where growth in private cars is going to come from in a world where a cheap ride is only 4 minutes away.