ON-DEMAND TAXI MARKET IN US

INTRODUCTION

US was the world`s biggest car market till China overtook it in 2010.There were ~17.1 Million new vehicles sold in 2017, second only after China`s ~24.2 Million. US car ownership is ~800/1000 inhabitants. So, how did the online taxi market in US gained scale in a matter of 3-4 years?

About 80% of American workforce drives to work alone, increasing road congestion and fuel emissions. The century old concept of car ownership has resulted in in-efficient mobility across the globe, more so in US.

The on-demand taxi couldn’t have come to US at a better time. The global transportation industry at the moment is going though nothing less than a revolution. If private car ownership became commonplace in last century, mobility as a service might be the new normal now.

There is also a fair amount of overlap between car sharing and ride-hailing users, but ride hailing has a much bigger and broader coverage. This is true in spite of the fact that ride-hailing as well as car sharing find most of their users in urban, higher educated and dense areas.

MARKET SEGMENTATION

MARKET DYNAMICS

The online gig economy represents a growing part of US workforce now, accounting for 5.1% of total workforce as compared to 1.9% in 2013.Transportation accounted for almost half of that workforce. In a sharp contrast to the increase in number of people joining this online gig economy, the earnings in transportation sector has halved over past 5 years. Among the reasons for decline in earnings is a steep cut in incentives offered to drivers, lower trip prices and supply outpacing demand.

As per our findings, 53% of on-demand taxi drivers in US now drive only 9.3 hours/week.

The median pay for all taxi and ride hailing workers was ~$12/hr in 2017.

A large chunk of on-demand taxi users in US belong to 18-29 age group i.e. ~31% of total users, and it goes on decreasing where users>60 years make up for only 6.3% of total users.

The growth of on-demand taxi market in US has taken away some share of mass transit riders. The US mass transit system, which is good only in a few metro cities now needs to adapt dynamic routing to win those riders back.

Among the biggest risks for the on-demand taxi market in US is that it has been found that ride hailing often increases congestion and because of that many transportation officials are mulling a cap per aggregator. There have also been instances where cities have slapped additional charge per ride to augment revenue and strengthen laws to cover for increased miles driven by on-demand taxis.

Another downside to the gig economy is that the drivers are considered contractors and they don’t receive, employer, health and other benefits.

Among urban dwellers, parking is one of the major reasons why they choose on-demand taxis over driving their own cars.

MARKET SIZE AND FORECAST

Although, Uber launched operations in 2009 and Lyft in 2012, the ride hailing boom didn’t happen until 2015.The reason is both Uber and Lyft pilot launched the existing algorithm based real time driver and rider match services.

As of 2018, Uber has ~0.91 million “driver partners” on its platform, as opposed to less than 0.2 million 2013.Some of the drivers of on-demand taxis also include students, part-time workers, housewives and retired people.

About 72% of on-demand taxi trips are in 10 large, metropolitan area i.e. Los Angeles, San Francisco Boston, Chicago, Miami, New York, Philadelphia, Washington D.C., Houston and Seattle.

New York City and San Francisco are the top 2 cities in terms of revenue generated by on-demand taxis in US. The average cost per trip in these cities is about $13-$16.In San Francisco, on-demand taxis had ~90% share of taxi trips, for New York the share was 41%.

The on-demand taxi market in US was valued at $XX B in 2018, growing at XX% till 2023.

COMPETITIVE LANDSCAPE

The competitive landscape of on-demand taxi market in US can be summed up as “Uber v/s Lyft”. In terms of valuation, Uber was valued at >$70B in Sep`18 whereas Lyft was valued at ~1/5^th i.e. $15B.The other three players are comparatively very small in terms of ridership, presence and driver network.

The battle between Uber and Lyft is now not only limited to on-demand taxis. Both companies want to be a complete mobility solutions provider. They have already expanded into bike-sharing and integrated public transit in their offerings.

Both companies are about to go public.

COMPANY PROFILES

1. Uber
2. Lyft
3. Curb
4. Shuddle
5. Via