IT HAS BEEN a year since Uber and Lyft pulled out of Austin, after residents of the Texas capital voted to maintain strict regulations the ridehailing companies refused to abide, including fingerprinting of drivers.
Uber and Lyft had fought hard for more permissive rules, spending a combined $8 million on the campaign (nearly seven times the previous record for a municipal election in the city). Without their services, they warned, drunk driving deaths would spike, 10,000 drivers would lose their jobs, and innovation in the booming tech hub would falter.
Austin dodged the dystopia. DWI arrests hit a five-year low in the six months following the vote. Former Uber and Lyft drivers signed up with the slew of services that filled the vacuum. Austin’s tech bubble continues to inflate. Yet the twin titans of the ridehailing world are on the verge of a comeback—not because Austin needs them, but because it may not be able to fend them off.
The Post-Uber World
Uber and Lyft waited just two days to shut down operations in Austin after voters rejected Prop 1, which would have replaced the City Council’s strict rules with a much more lax regime. Replacements willing to follow the rules—Ride Austin, Fasten, GetMe, Wingz, Fare, InstaRyde—rushed in. Despite embarrassing service outages during the rainy second night of SXSW, which brought over 37,000 extra people to town, they have provided solid service. Apps don’t drive people, they argue. People drive people. And as long as they offer safe rides at reasonable prices, who cares which company is playing middleman?
Uber and Lyft care, of course, which is why they responded to the loss by ignoring Austin and lobbying state legislators for regulations that would supersede any local rules. The strategic shift is working. Last month, the Texas house passed a bill that looks a lot like the proposition Austin voters rejected, removing the fingerprinting requirements. If it clears the Senate and Governor Greg Abbott’s desk, whatever Austinites prefer stops mattering. Same for residents of other cities with their own ridehailing rules, including Houston, Galveston, and Corpus Christi.
All of which raises the question: What does ridehailing look like in Austin in a post-post-Uber/Lyft future?
The Post-Post-Uber World
As the biggest and best known companies in the field, Uber and Lyft usually face little competition when they move into new cities. A re-entry into Austin may not go so smoothly. Many of the drivers now working with Ride Austin et al. started with Lyft and Uber. They may not want to go back: Lyft takes a 20 percent cut of the fare. Nonprofit RideAustin pays out the full amount for its standard service; Fasten takes a flat-fee commission of just under a buck per ride. Drivers tend to go where the money is, and passengers go where the drivers are. And if Uber and Lyft are seen as bullying their way back into the city, ill will could prove a force to reckon with.
But being the Oreo in a field of Hydrox and Newman-O cookies carries other advantages. Uber and Lyft have the resources to offer cheap rides as a way to dominate the market. Uber subsidizes as much as 59 percent of the cost of each ride, while RideAustin began breaking even on those costs in February, after less than a year in operation. If the big boys want to compete in Austin, they can lower fares, raise driver pay, hope money trumps feelings, and starve out the competition.
Those platforms also benefit from the heaps of data they’ve accumulated over the course of eight years and billions of rides, which may provide logistical advantages the upstarts haven’t considered. Uber, for example, employs a cadre of data scientists to come up with ways to get drivers to behave the way the company wants them to.
If Uber and Lyft do deploy their voluminous resources to squash the competition, it wouldn’t be the first time. When ridehailing progenitor SideCar sold to General Motors in January 2016 for a tiny fraction of Uber’s valuation, CEO Sunil Paul claimed innovation and service mattered little in the end. “We failed,” he wrote in a blog post, “because Uber is willing to win at any cost and they have practically limitless capital to do it.”
Austin voters are likely to walk away losers in their efforts to rein in the big companies, and Ride Austin, Fasten, and their brethren may well meet Sidecar’s fate. Austin may not need Uber and Lyft, but independence doesn’t guarantee immunity.