How Uber learned to stop fighting and play nice with taxis

For over a decade, Uber and taxis have been locked in a desperate battle for control of cities across the world. In one corner, the century-old practice of raising your hand to hail a ride. In the other, pressing a button on your smartphone to summon a car.

But while Uber has succeeded in decimating the cab industry in many cities, it has failed to completely wipe it out. In fact, the taxi business is thriving, with the number of drivers in the US almost tripling in recent years. And now, there are signs that the long and bitter struggle between Uber and taxis is fading as more and more taxi fleets are choosing to be folded into Uber’s cold, technological embrace.

The latest is Los Angeles Yellow Cab, which announced today its plan, along with its partner fleets, to list approximately 1,200 taxis in Uber’s app as part of a pilot program. The pilot has received approval from the Los Angeles Department of Transportation, allowing taxi driver onboarding to begin this week in Los Angeles, San Diego, and Orange counties. Drivers will start receiving Uber trip referrals in the coming weeks.

Los Angeles joins New York City, San Francisco, and a host of other major cities around the world that feature their taxis in Uber’s ridehail app. It also represents the emergence of a new and unexpected alliance between taxi owners and the tech company that vowed to disrupt their business.

“I firmly believe that Uber and taxi are better together,” Uber CEO Dara Khosrowshahi said in a statement to The Verge. “We look forward to giving every taxi driver in the world access to Uber trips while continuing to earn the trust of our taxi partners and drivers globally.”

Uber’s legacy of playing fast and loose with the rules has irked taxi owners, who have accused the company of ignoring local regulations when it moves into new markets. Uber notes that the taxi business had many flaws before it arrived, including predatory loans.

Still, fleet owners and driver associations have largely been helpless as they’ve watched their customers flock to the new platform that promised easy electronic hailing and seamless payment. Medallion prices in New York and elsewhere plummeted, and lenders who made a living by financing the taxi industry went out of business. 

Uber was happy to fuel the vitriol. “We’re in a political campaign, and the candidate is Uber and the opponent is an asshole named Taxi,” Uber co-founder and former CEO Travis Kalanick said in 2014. “Nobody likes him, he’s not a nice character, but he’s so woven into the political machinery and fabric that a lot of people owe him favors.”

But a curious thing has happened. After it failed to completely wipe out and replace the taxi business, Uber instead turned to taxis to help fuel its next stage of growth. The company has said that, by 2025, it hopes to list every taxi in the world on its app. And for once, taxi owners are eager to be involved.

“We do what we do really great,” said Ron Sherman, chair and CEO of Creative Mobile Technologies, or CMT, one of Uber’s partners in New York City. “Okay and I hate to say it, but what they do is really great too.”

Where using Uber may get you a taxi

Uber is slightly vague in how it describes the breadth of its growing taxi business, declining to discuss the exact number of cities and drivers. Taxis are featured in the Uber app in 33 countries around the world, with “hundreds of thousands” of taxi drivers receiving trip referrals from the company. Some of the largest markets by volume include Hong Kong, Poland, South Korea, Sweden, and Turkey. Last year, Uber struck a deal to include around 14,000 of New York City’s iconic yellow taxis in its app.

What Uber does like to talk about is the potential for taxi drivers to make a lot more money by accepting trip requests through its app. Taxi drivers are “on track to make well over $1 billion in earnings this year,” the company said.

When a taxi is hailed through Uber, the company gets a cut, though it declined to say how much. Uber’s average global take rate for rides in the third quarter of this year was 21.2 percent, down from 26.6 percent in Q3 2022.

In San Francisco, where taxi drivers have been accepting fares through the Uber app since November 2022 under an ongoing pilot program, drivers were found to earn an average of $1,767 per month from Uber trips alone. That’s almost 24 percent more on average than drivers who do not accept Uber trips, according to Q2 data compiled by the San Francisco Municipal Transportation Agency. For taxi drivers participating in the pilot program, nearly a quarter of their revenue each month came from third-party referrals like Uber.

The partnership has taken many different forms. In South Korea, Uber created a joint venture with SK Telecom to compete in the country’s high-value mobility market. In Hong Kong, one of the largest taxi markets in the world, Uber acquired the city’s leading e-hail app, HKTaxi, to list more taxi drivers in its app.

How Uber connects with taxi drivers

Uber is using its technological know-how to fuel the expansion. The company’s engineering team wrote an API to help taxi technology providers connect seamlessly with Uber’s customers. In that way, someone hailing a ride with the Uber app can connect with a taxi if it happens to be the closest vehicle. Fares are presented upfront, much like they would be with an Uber trip. And the taxi drivers who receive the trip requests will be paid the same rate as an Uber driver.

“Most of our business is the Uber rider app talks to the Uber driver app,” Sachin Kansal, vice president for product at Uber, said in an interview. “But as we wanted to have some other driver app prompt to our system, we needed to provide this API.”

The API was built specifically to enable taxis that are connected to either Curb or Arro, the two smartphone apps that are owned by New York City’s licensed technology providers, to receive trip requests through Uber. But now, it’s being used globally, Kansal said, with taxi owners across the world using it to connect their drivers to Uber customers.

Depending on the city, riders will see different things in their app when they hail a ride. Some riders will see a standalone feature to request a metered taxi. In other markets, taxis are included among the vehicles riders may get when using UberX, its primary ridehail product.

“There is enough demand to go around,” Kansal said. “We actually want to continue to build our core technology... such that we can bring every taxi in the world on the Uber platform.”

Kansal, who is a former executive at Flywheel, an app-based taxi operator in San Francisco, has leveraged his knowledge of the taxi industry to spearhead this effort to a variety of fleets and proprietary tech into Uber’s platform.

“Sachin’s experience in the taxi industry combined with our team’s passion for solving problems with technology have delivered a cutting edge integration that is a win for everyone,” Khosrowshahi said.

Why taxis?

Before the pandemic, Uber was struggling to become profitable, but there was no question that Uber’s model of using venture capital funds and other investments to subsidize fares and undercut the taxi industry was having its desired effect. The impact in New York City was particularly acute. Nearly a thousand drivers filed for bankruptcy, with at least six drivers dying from suicide.

Still, despite these efforts, taxis were continuing to thrive in the US and overseas markets. Uber began making offers to list cabs in its app in the hopes the increase in supply would help attract new customers while salvaging its business in key markets.

When covid hit, the ridehail and taxi businesses both dried up. And when lockdowns eased, Uber struggled to find enough drivers for its customers, forcing it to spend hundreds of millions of dollars on driver bonuses and incentives aimed at attacking the shortage.

Taxi operators say those efforts are starting to pay off, with drivers in multiple markets reporting an increase in earnings after they began to accept trip referrals from Uber. Some are even going so far as to predict the new partnerships will lead to a resurgence of the taxi industry, which has struggled with low wages, expensive loans, and heightened competition.

“We are seeing a lot of experienced rideshare drivers now consider driving a taxicab and now getting a professional cab driver’s license,” said Hansu Kim, president of Flywheel Technologies, which partners with Uber in San Francisco, “because they’re realizing through this partnership they can get that business from rideshare and also the taxi business.”

But why work with Uber when the company has shown a willingness to fight efforts to raise wages for drivers while preventing them from organizing and refusing to reclassify them as employees? The answer, in short, is money.

Some of Uber’s biggest costs are around insurance and liability, according to sources with knowledge of the deal. By offloading a certain percentage of its trips to taxi drivers, it can reduce those costs while also increasing revenue. The company recently reported an operating profit for the first time in nearly 14 years in service. Maintaining those profits while increasing its supply is a win for Uber.

And owners say it’s a win for taxi drivers, many of whom have struggled for years to match the company’s technological prowess.

“The minute people can make money,” CMT’s Sherman said, “nobody cares who the trip’s coming from.”

Update September 26th 1:44PM ET: Uber’s global take rate was 21.2 percent in Q3 2023. While the company’s earnings statement reports the take rate as 26.9 percent, that takes into account a net benefit from business model changes in the UK that reduced the take rate by 810 base points. A previous version of this story included the unadjusted take rate.