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Articles

The ride-sourcing industry: status-quo and outlook

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Pages 561-576 | Received 28 Jul 2020, Accepted 06 Apr 2021, Published online: 29 Jun 2021
 

ABSTRACT

Ride-sourcing, the use of private cars to provide on-demand mobility services, first appeared in San Francisco around the year 2010. Since then, transportation network companies (TNCs) who offer ride-sourcing services have expanded all around the world. By examining three case cities (San Francisco, Mexico City, Paris) we explain what facilitated this growth and how the regulation of TNCs differs. Subsequently, an economic analysis discusses the current expansionary strategy of TNCs and their future. We show that TNCs adapt their strategies to local contexts, with first priority to establish themselves in the market, if necessary, using gray regulatory areas, even if they face resistance from city authorities, taxi drivers and other groups, and despite being unprofitable. Our economic model explains this. We show that an unregulated ride-sourcing market leads to monopolistic situations once autonomous vehicles become available. We hence conclude that city authorities need to develop a regulatory framework to maximize social welfare.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 CPUC defines a TNC as ‘an organization, whether a corporation, partnership, sole proprietor, or other form, operating in California that provides transportation services for compensation using an online-enabled app or platform to connect passengers with drivers using their personal vehicles. The primary distinction between a TNC and other Transportation Charter Party (TCP) is that a TNC connects riders to drivers who drive their personal vehicle, not a vehicle such as a limousine purchased primarily for a commercial purpose.’ (CPUC Citation2013)

2 Zoepf released a statement including newer calculations (Zoepf Citation2018), however still concluding that between 41% and 54% of drivers earned less than the minimum wage. Another interesting finding of Zoepf et al. (Citation2018) was that many drivers could generate negative tax income from their ride-sourcing activities, due to standard mileage deduction values lying above their real costs per mile. This means that they could declare negative overall income from ride-sourcing activities, which could imply that they are receiving a hidden tax subsidy, which could be another argument against the financial viability of the current TNC business.

3 The following cities were included in the preliminary quantitative analysis: Amsterdam, Bangkok, Barcelona, Berlin, Brussels, Cape Town, Charlotte, Chengdu, Chicago, Chongqing, Columbus, Guangzhou, Hyderabad, Istanbul, Lahore, Leeds, London, Los Angeles, Madrid, Milan, Marseille, Mexico-City, Moscow, Munich, Nairobi, New York City, Osaka-Kobe, Paris, Beijing, Philadelphia, Phoenix, Port-au-Prince, Portland, Prague, Puebla, Rom, Sao Paulo, San Antonio, San Diego, San Francisco, Seattle, Seoul, Shanghai, Sofia, St. Petersburg, Teheran, Tokyo-Yokohama, Valencia, Vancouver and Zagreb.

4 The following cities were considered in the second phase of the study: Atlanta, Amsterdam, Beijing, Bogotá. Cape Town, Nairobi, Mexico City, New York, Paris, London, Los Angeles, San Francisco, Sao Paulo, Shanghai, Vancouver, Vienna.

5 Another description of the evolution of TNCs in the early 2010s can be found in Shaheen (Citation2018).

Additional information

Funding

This research was carried out as part of two projects: ‘Urban Mobility’, financed by the Helmholtz Foundation (DE), and ‘Sharing Cities’, financed by Volkswagen AG (DE).

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