TRADITIONAL TAXI CARTELS ARE DOOMED AS ON-DEMAND RIDESHARING SERVICES TAKE OFF – LYFT OPERATES IN 60 MARKETS, UBER IN 100

by Mark J. Perry

Originally published April 24, 2014, on the AEIdeas blog (www.aei-ideas.org).
Reprinted with permission of the American Enterprise Institute, Washington, DC.

Tech Crunch is reporting that “Lyft Launches In 24 New Markets, Cuts Fares By Another 10%“:

On-demand ride-sharing startup Lyft is expanding aggressively in the U.S., announcing the launch of service in 24 new markets today (see the Lyft trademark “carstache” above). Along with the expansion, Lyft company will be offering free rides to new users in all launch markets while also lowering its fares by another 10 percent in existing markets.

Today’s expansion brings the total number of Lyft markets served to 60, which is up from 36 just a day ago. That is the most coverage in the U.S. by any of the new on-demand ride app companies. It will also position Lyft as first mover in 13 markets where the company won’t be competing with rival Uber at launch.

Lyft is offering free rides for the first two weeks of service as a way to entice new users to sign up. That’s more or less standard operating procedure for the company in any new market it serves.

But the company is also discounting fares in existing markets by an additional 10 percent. The price cut is the second discount Lyft has applied just this month as it seeks to acquire new customers in many places where it’s battling Uber and other transportation services.

From another Tech Crunch article “Everywhere From Oklahoma City To Beijing: Uber Now Available In 100 Cities Worldwide“:

It’s hard to believe that on-demand ride service Uber is less than four years old. Launched in San Francisco in 2010, the company has expanded aggressively over the last several years. Today, the company announced a major milestone: With its launch in Beijing, Uber is now available in 100 different cities around the world.

Uber started out as a way for San Franciscans to hail a black car with your mobile phone, and spent about a year exclusively in that market refining its service. Its next step was launching in New York City, a place with a pretty good transportation system and ample supply of taxis.

Over time, Uber continued to take an unconventional approach to its expansion. As Uber head of global operations Ryan Graves reminded me today, the company’s first international launch wasn’t in London, which would have made sense due to common language, but Paris.

And it’s increasingly making its service available in places that don’t fit the usual framework of a large urban center like Tokyo or Berlin. That’s evident with the launch of Uber in smaller cities like Sacramento, or Fresno, or Oklahoma City. The success it’s seen in those cities shows that Uber probably works just about anywhere.

MP: It’s hard to believe that the traditional, high priced, restricted entry taxi cartels will be able to survive now that there’s increasing competition from the new, user friendly, convenient, affordable on-demand ride sharing services like Lyft and Uber, unless, of course, the taxi cartels adapt to the new economic environment that places the interest of consumers above the interests of entrenched taxi cartel members. That may be too much to ask. Too many consumers have now “gotten a taste” of the new consumer friendly business model, and the old producer friendly way of doing business simply can’t survive. It’s an outdated and doomed model that will succumb to a new gale of Schumpeterian creative destruction. It’s a change that’s long overdue and a huge benefit to consumers everywhere. Let Lyft and Uber bloom in a thousand cites!

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