Welcome to Uber-Land

The ride-hailing giant from California and why it’s not coming to Germany any time soon

by Natalie Rauscher

One of the first things he told me was that his day-job was managing the parking lot for Warner Bros. Studios in Hollywood – I wanted to know more! I guess, only in Hollywood is your Uber driver on a first-name basis with celebrities like Ashton Kutcher! I left a tip, a glowing review, and a note to the driver: So nice chatting with you!

(recollection of author, Uber ride, Los Angeles)

Uber is a very controversial company. On the one hand, it is often portrayed as the huge success story of the digital platform era – now going public with the I.P.O. valuing the company at about $82 billion. (de la Merced and Conger 2019) For years, it has been seen as one of the biggest and most valuable companies to come out of Silicon Valley.

The I.P.O. rating and first days of trading in the last few days were somewhat less grand than expected, however. The New York Times writes: “While the event solidifies Uber’s position as the biggest American technology company of its generation to go public, it will be a disappointment to the investors, executives and cheerleaders who had bigger dreams for it.” (de la Merced and Conger 2019) After only two days, the Uber debut has sunk considerably, with shares now selling below offering price. (Grocer 2019)

On the other hand, the ride-hailing giant always had its critics. Particularly on the side of labor activists and unions, Uber has never been a stellar success story, but rather the downfall of important labor regulations, pushing workers into a world of cut-throat capitalists without any power or security.

In Germany, most of Uber’s core business model is still prohibited. UberX allows non-commercial drivers, de facto private entities, to use their own car to work as an Uber driver and to pick up guests. This is not allowed in Germany. Yet, there is talk about deregulating the German transportation market a bit more in the future. German transportation minister Andreas Scheuer recently called for a liberalization of the taxi industry that could start in 2020. He wants to give ride-hailing platforms more leeway on the German market by, for instance, allowing them to stay on the road after a trip, rather than returning to their headquarters, as well as by revoking a pooling-ban for rental services. (Zeitonline 2019)

Given this renewed interest in Uber and its business model, there is the question: What can ‘Uber-land’ California, the home and birthplace of so many digital platform businesses, tell us about the tech giant?

One driver said he liked Uber for its access. He wanted to take a step back in his real estate job after he had health issues and was now driving for Uber instead. Was Uber really a step back from the stress? Or rather a much-needed way to pay back all those medical bills?

(recollection of author, Uber ride, Los Angeles)

Much of the controversy around Uber has to do with its business model – contracting independent drivers instead of employing them. There were other headline-making scandals like the business-culture propagated by its founder and former CEO Travis Kalanick, who put growth of the company first, at all costs. But Uber continues to face most of the backlash when it comes to labor laws.

So, how does Uber really work? First of all, Uber did not set out with a brand-new idea. Instead, it wanted to disrupt an established field, namely the taxi and transportation industry. The taxi industry is usually a highly monopolized and strongly regulated area of the economy. Therefore, it has been resistant to change for a long time. Such areas are potentially ‘ripe for disruption’ as Rachel Botsman would put it. (Botsman 2013) As many platforms did, Uber tapped into that potential for change and offered a quicker, easier, and cheaper version of a well-known service – hailing a ride.

With the virtual ubiquity of smart phones in everyone’s pocket, smart-phone apps offered the possibility to consume on the go, anywhere and anytime. This is one key aspect of Uber’s success. With its well-designed app, it has become a crowd-pleaser. It works in one seamless process including registration of riders, matching you to drivers for a given destination, monitoring your ride and driver in real-time, paying cash-less, and reviewing your ride. Without the advances in digital technology and the wide distribution of mobile Internet, Uber’s success would be unthinkable.

In many instances, Uber even offers you different options depending on how much you want to spend or your desire for luxury cars. UberX is the ‘regular’ option and comes closest to a taxi service. UberSelect gives you an upgraded car, UberBlack an even nicer and bigger car for a higher rate. UberPool, on the other hand, is one of the cheapest options where you share the car with other guests going into the same direction. This takes longer than a regular ride but comes at a fraction of the cost. For all rides, the app tells you how much you will have to pay before you start your ride; tips can be added after you arrive.

So, is the app the only factor that makes Uber so successful? No! One other key difference to a ‘regular’ taxi service is that the drivers are not employed by Uber but are contractors who use their own car to transport customers. Uber consistently claims that it is a technology company, not a transportation business. Once drivers log onto the app, they are matched with potential riders and can either decline or accept the request. They are paid and rated over the app, and they cannot charge their own fares. Prices might change during the day, depending on the availability of drivers and requests. However, Uber can also not obligate drivers to log on or accept rides. Uber has no control over how much and when drivers work. This is why Uber usually argues that drivers are not employed but independent.

He said he had been a taxi driver in the past and that Uber was much better. ‘But don’t you have to cover all your expenses yourself? Gas, insurance, repairs?’ I asked. ‘Yes’, he said, ‘but it’s still much better’.

(recollection of author, Uber ride, San Francisco)

Contrary to popular opinion, Uber is not without standards. Drivers need to pass an online security screening that checks their driving and criminal record, and they need to have had a driver’s license for at least a year. Also, not every car can be used to drive for Uber. They need to be 4-door vehicles and meet minimum standards like being less than 10 years old and having in-state auto insurance. In addition, Uber offers 24/7 emergency assistance in the app, as well as extra insurance for when drivers are online, en route, or during trips.

He said that some people did not take care of their cars properly. Why would they have a messy car? He was incredulous. He really took pride in his car, which was without a speck!

(recollection of author, Uber ride, Los Angeles)

Attraction and retention of drivers are challenges for Uber. Indeed, in the Bay Area in California, where Uber was founded, Uber rolled out radio ads promising bonuses to new drivers for completing a certain amount of rides. They also started a partnership with Hertz to give people access to eligible cars to drive for Uber.

He had bought the car just to drive for Uber. That was a lot of pressure. You need to cover your expenses and earn more to make a profit. Our ride was about $7. How many rides does he have to make to reach a profit?

(recollection of author, Uber ride, San Diego)

Anyone who has taken a taxi cab in the US will likely agree that Uber is indeed quite an improvement. Most of the cars are new and clean. Drivers are usually very friendly and chatty – of course, they are rated after the trip, unlike taxi drivers. Yet, many drivers were even open to discuss their situation as a driver for the platform and were aware of controversies surrounding Uber. Most drivers that I met, which is by no means a representative sample, liked Uber because it let them work on their own schedule. Most of them had a different job and were driving for Uber (and often for the competitor Lyft at the same time) as a supplementary option. They even took pride in offering a better service than taxis, appraising their own cars and how they took care of it.

He had a nice car and was eligible for UberSelect. He still took my request for normal fare. You have to make those hours count! He liked that I complimented his car. He liked Uber, too. No one who decided for him when to work. He could charge a good rate with Select. Parking, though, that was the real nightmare in San Francisco!

(recollection of author, Uber ride, San Francisco)

In Germany, the discussions around Uber and other ride-hailing platforms are starting to boil up again. Yet,  criticism does not necessarily target working conditions but rather the crowding-out effect it could have on taxis. As mentioned before, the government plans to liberalize the taxi market in the coming years. Taxi businesses have already started to protest against these changes. Critics say that ride-hailing platforms are picking the desirable customers off the market, leaving the taxi drivers with the more undesirable and less well-paying gigs, for example during non-busy night times. Others see the problem in increasingly congested inner cities areas when even more cars will be on the road. (Traufetter 2019) Yet, the core business of Uber, using your own private vehicle for driving customers around, is still prohibited in Germany. And this will not change any time soon.

Interestingly though, the truth about taxi driving in Germany is, in some regards, not that different from an Uber driver in the US. Although they might not use their private cars, many taxi drivers actually work independently. Both employed, as well as independent driving is frequent for taxi drivers in Germany. (Bors 2019) If they work for a company, they are eligible for minimum pay in Germany (currently at €9,19). If they are independent, this does not apply, which  is a harsh reality. Especially health care insurance is expensive for a self-employed person in Germany because you need to cover both your own and the employer’s share of payments. (Stern 2019)

Uber might not roll out their core business model in Germany any time soon. Yet, German taxi drivers are likely to face a harsher market anyhow, with more competition coming in. German businesses are increasingly pushing into the ride-hailing market. MOIA, a ride-sharing service owned by Volkswagen, for instance, has started its service in Hamburg and Hannover. 

He pulled up when it was still dark. Our flight left early. We had so much luggage we worried it wouldn’t fit in his car but it did. I wondered how often he got up in the middle of the night and if he went on to another job after giving us a ride to the airport...

(recollection of the author, Uber ride, Fremont, CA)

On a worldwide scale, Uber remains the absolute business giant and therefore receives the largest share of public scrutiny among the ride-hailing platforms. California has become the absolute Uber-land, you can now hardly picture a city without the Uber and Lyft cars circling around. This is unlikely to happen in Germany in the coming years as the most important part of the ride-sharing platforms’ business model remains prohibited.

With the two leading businesses in the market, Lyft and Uber now going public, it remains to be seen how sustainable their success will be, especially with less than pleasing initial ratings. None of the ride-hailing businesses has  shown that they will make profits any time soon. Conflicts over labor regulation, fair payment of drivers, and congestion of cities also remain unresolved.

But for now, Uber is here to stay – so enjoy the ride!

 

About the author:

Natalie Rauscher is currently pursuing her PhD at the Heidelberg Center for American Studies where she is also working as a research assistant. Her dissertation looks at political and public discourse around the topics of the future of work and automation in the U.S. She is also interested in social media and social movements. She is a founding member of the HCA Graduate Blog.

Get in touch on Twitter!

Check out her chapter Von Occupy Wall Street zu den Nasty Women in ‘Strategische Politische Kommunikation im digitalen Wandel‘ published by Michael Oswald and Michael Johann in 2018 (Springer VS).

References:

Bors, Sasha. 2019. “FAQ zum Job als Taxifahrer.” http://gestern-nacht-im-taxi.de/wordpress/faq/faq-zum-job-als-taxifahrer/.

Botsman, Rachel. 2013. “The Sharing Economy Lacks a Shared Definiton.” FastCompany, accessed June 1, 2017. https://www.fastcompany.com/3022028/the-sharing-economy-lacks-a-shared-definition#4.

de la Merced, Michael J., and Kate Conger. 2019. “Uber I.P.O. Values Ride-Hailing Giant at $82.4 Billion.” The New York Times, accessed May 10, 2019. https://www.nytimes.com/2019/05/09/technology/uber-ipo-stock-price.html.

Grocer, Stephen. 2019. “Uber’s Dismal Debut Is a Rare Event on Wall Street.” The New York Times, accessed May 13, 2019. https://www.nytimes.com/2019/05/10/business/dealbook/uber-market-debut-rare.html?dlbk&te=1&nl=dealbook&emc=edit_dk_20190513.

Stern. 2019. “Was verdient eigentlich ein Taxifahrer?”. Stern, accessed May 10, 2019. https://www.stern.de/wirtschaft/job/taxifahrer–was-verdienen-eigentlich-taxi-fahrer–8125846.html.

Traufetter, Gerald. 2019. “Widerstand in der CDU gegen Scheuers neues Taxi-Gesetz.” Spiegel Online, accessed May 10, 2019. https://www.spiegel.de/wirtschaft/unternehmen/taxi-vs-uber-andreas-scheuer-erfaehrt-kritik-aus-der-cdu-verkehrsminister-reagiert-a-1262151.html. Zeitonline. 2019. “Verkehrsminister will Taximarkt liberalisierend.” Zeit online, accessed May 10, 2019. https://www.zeit.de/wirtschaft/2019-03/andreas-scheuer-verkehrsminister-taxi-markt-uber

Picture References:

Roadtrip Road 66, Nan Fry, 2015, Flickr

Uber, Stock Catalog, Quotecatalog

I love you, California, 1913, California State Library, Wikimedia Commons

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