UberX and Legalising Ridesharing Services

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Table of Contents

• UberX
• Disruption of the Traditional Taxi Industry
• Legislative Change
• The Inevitable Rise of Ridesharing

In late October, the ACT legalised uberX and other ridesharing services. At least one other Australian state appears ready to follow this decision shortly with the Baird government in NSW preparing to legalise ridesharing. Remaining states are at various stages of investigating its potential impact on existing industries and consumer safety.

UberX

UberX, founded six years ago in the US, is synonymous with ridesharing. Recently valued at more than $50 billion, the uberX model uses an app to connect ridesharing passengers with drivers. UberX offers multiple transport services including fully licenced private drivers, taxis and a planned expansion to include helicopters.

The most controversial service they offer is the ridesharing service UberX. An uberX driver uses their personal car to transport UberX app users and receives a percentage of each fare. The app calculates the fare and automatically deducts the payment from the passenger’s credit card in a cashless transaction.

One of the key elements to the uberX model is the rating system for both the driver and passenger. Drivers are encouraged to go above and beyond to maintain a high rating. uberX provides additional training to drivers falling below the company’s internal requirements, and customer ratings help reduce risk to the driver by ensuring unruly passengers are quickly weeded out.

This system aims to ensure that the uberX service surpasses the taxi industry and it appears to be doing exactly that.

Disruption of the Traditional Taxi Industry

Prime Minister Malcolm Turnbull describes disruption to traditional industries as Australia’s friend. Although, traditional businesses are less likely to share the sentiment, particularly in cases where the regulatory environment creates significant barriers to change.

Besides issues with the standards of service, one of the taxi industry’s biggest challenges is the cost of a taxi licence plate, which varies in value but typically remains more than $200,000. 

This high figure reflects an initial exclusivity in that the industry afforded a limited number of licences, before the increased prevalence of ridesharing. As this cost is passed on to the consumer, the taxi industry is already at a disadvantage compared to the significantly lower barriers to entry currently enjoyed by ridesharing services.

Legislative Change

The impact of services like uberX on the taxi industry has been the cause of significant debate. Each state has approached the issue with varying degrees of willingness. The ACT government decided to reduce the cost of taxi plate licences. It also required rideshare drivers to undergo background checks, while ensuring their vehicles were adequately insured and regularly inspected. This represents the ACT’s attempts to level the playing field. It ensures both that ridesharing’s lower overheads do not heavily disadvantage the taxi industry, and provides customers with an adequate level of safety when using a ridesharing service.

This compromise addresses several concerns held by various stakeholders regarding user safety and job security of Australia’s taxi drivers. It demonstrates the two are not incompatible, even if one will need to innovate to remain competitive.

The Inevitable Rise of Ridesharing

With user demand for ridesharing services increasing, and the ACT’s strong lead, legalising ridesharing throughout the country appears inevitable. The sluggishness of other states in initiating change may emphasise differences between state governments such as NSW welcoming disruption and those seeking to stifle it.

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