Ride Hailing in the EU — the disrupter could get disrupted.
The mobile app based ride-hailing business in the EU is going through some interesting times at the moment. Uber is, by far, the market-leader in this space and it has been seen as a trend-setter across all markets it’s been present in. A ruling pending in the European Court of Justice (ECJ) could potentially seal the fate of Uber and it’s contemporaries in the EU, though.
As many of you might be aware, a Spanish trade union has taken Uber to court over the ride-hailing giant’s claim that it cannot be treated as a regular transportation company because it is, what’s called in EU legal parlance, an ‘information society.’ What that means is Uber claims to only be a facilitator in a commercial transaction between cab owners and the riders through its app. However, there has been unabated opposition to Uber’s business model in Europe and most major cities have seen protests, even violent ones, against the company’s presence in these markets. The latest episode in this saga is the case brought by a Barcelona based taxi drivers’ union against Uber which has now been brought before the ECJ. The union’s contention is that Uber should be treated a transportation company and that it needs to abide by the rules other cab drivers/companies have to abide by. A setback, in the interim, for Uber has been the ECJ’s advocate-general’s opinion that Uber should indeed be treated as a transportation company.
Precedent has it that the ECJ often (but there have been notable exceptions) does in fact heed the advocate-general’s opinion, generally. Given this development, along with the incessant troubles Uber has faced in various major European cities, and of course the generally welfare-ist/pro-worker attitude of Western European societies in general, chances are that the ECJ might in fact rule that Uber should be treated as a transportation company. If this happens, there are major implications not only for Uber but all other tech startups in this space. Some of the major implications could very well be:
· Ride-haling app companies will be made to focus on drivers’ work conditions, like any other traditional transportation company. This means guaranteeing a minimum wage, offering paid leave, regulations on working hours, and so forth.
· The ride-hailing startups themselves would probably have to get registered/licensed as cab companies (as opposed to currently only having to hire commercially licensed cab-drivers in EU markets).
· All this could quite likely accelerate efforts in autonomous driving technology. More on this below.
In the short-run, if the ruling does indeed deem app based ride-hailing services as conventional transportation providers, it is going to be a tough time ahead for the several smaller Uber competitors in Europe. I still see the likes of Uber, Gett and mytaxi remaining in the business but they will likely stay on in EU markets and keep a low profile until they can roll-out self-driving (most certainly human-monitored at the beginning) cabs in these markets. According to most experts, this is still at least ten years away from becoming a reality. But from the looks of it, that is what the major EU-based ride-hailing operators are betting on. Why I would say that? Gett got a massive $300 million funding from Volkswagen, which has a major driverless car program going on. mytaxi is majority-owned by Daimler, another big player in autonomous driving tech research today. And of course, Uber has always been clear of its vision of rolling out driverless cabs in the not-so-distant-future. What this probably implies for the short-term for the end-user in Berlin or Paris is that she will not benefit from the cut-throat competition between major operators that has been taking place in Asia, the Middle East and the US.
Another interesting development this might lead into is that ride-sharing apps — these would still be classified under the ‘information society’ category because they impose caps on the amount a person sharing-out her car can charge — might become more high-profile players in the ride-hailing/sharing-economy space. The biggest company by far in this segment is BlaBlaCar and they might stand to gain quite a bit from this turn of events. This space has several other smaller players across Europe like the French hybrid ride-hailing/ride-sharing startup Heetch. One reason why the pure play ride-sharing is not so big is because of the kind of massive traction players like Uber have had but if ride-hailing apps companies are forced to comply with strict regulations, there’s a fair chance ride-sharing companies could grab some of their business.
The ECJ could very well rule in favor of Uber and then we get to see a whole separate set of possible outcomes. Either way, the ride-hailing business in the EU is up for some pretty interesting times. And, we won’t have to wait too long to see which direction things go.
