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Uber Merger – What have Autocab Unleashed?

The sale of leading dispatch software provider Autocab to Uber in August sent shock waves through the taxi and private hire industry. Now that the dust has settled somewhat, we’ve identified and analysed seven potential consequences for the trade of the deal that created so many headlines.

Civil War

The instant reaction of many within the industry was rage when the news broke. Having seen Autocab as an ally against the threat Uber poised to their livelihoods, the firm’s decision to sell to their great rival came as the most unwelcome of news. For example, Alan Thomas, managing director of Radio Cars of Liverpoo posted, “It is a total sell-out of the trade by the very people we trusted to combat Uber.” The instinctive reaction of many was to call for operators to move their business to another dispatch software at the first opportunity. Will those operators that chose to work with the old enemy find themselves cut off by the rest of the industry?

Spreading the Virus

Perhaps due to all the talk of R rates of late, many opponents have accused Autocab of helping to spread a “disease” that at the moment mainly affects only London. Uber has struggled to replicate its success outside of the capital. It has launched in approximately 40 towns and cities and hasn’t gained significant market shares in the majority of them. This failure has been due to a combination of the below factors:

  • Loyalty to local operators has proven strong
  • With prices already low their USP compared to the London market has been less dramatic
  • Fewer customers outside of city centres see a cashless app as a benefit
  • Dealing with the regulations imposed by multiple licensing authorities proves more challenging
  • Greater geographical spread of regional fares makes e-hailing less instantaneous and less appealing for users
  • Larger distances required to collect fares makes the model less attractive economically for drivers

However, the acquisition of Autocab will provide a new angle of attack. One that could prove far more fruitful.

Get out of Jail Free Card

Many in the industry believed Uber’s UK operations were on the ropes. They currently await the outcome of two legal cases that could have a significant bearing on their long term future. Firstly, they’re fighting TfL’s decision to reject their operator license renewal application on the basis that they’re not a fit and proper company. London is by far their biggest market and a failure to gain a license extension there could have potentially resulted in them exiting these shores. Especially as they’re simultaneously also attempting to overturn a tribunal’s decision on employee rights that might lead to them facing astronomical additional costs. They are appealing against their drivers being classed as “workers”, as this would mean that they need to provide sick and holiday pay as well as National Insurance contributions. By agreeing to sell, Autocab have theoretically thrown the American firm a lifeline.

Change of Strategy

Has Uber finally realised that its strength is marketing? Uber’s purchase of Autocab will allow them to pivot their business model should the need arise if one or both of their impending legal cases go against them. Putting questions regarding the validity of their approach aside, nobody can ignore Uber’s ability to generate trip requests. However, since it launched it has constantly been in the law courts battling both regulators and drivers. Speaking to Pro Driver magazine industry expert Dr Mike Galvin expressed his belief that, “Uber wants to be a network operator, and doesn’t want to deal with regulators, drivers and licensing authorities.” Logically, by becoming merely a marketing platform they would fulfil this aim. According to Galvin, Uber could simply, “Shut down their city operations outside London and move into the non-regulated environment, and then push jobs to existing operators via Autocab.”

Data, Demand and Drivers

In a scathing open letter to the industry CEO of rival dispatch firm iCabbi claims that the acquisition of these three assets lie behind Uber’s purchase of Autocab. In regards to data, Walsh argues that “Knowledge is power, and acquiring Autocab who processes huge amounts of this data would give Uber’s vast data team enormous competitive advantage.” Access to this “Big Data” he believes will facilitate the “mass aggregation of booking trends” and will inform Uber’s, “Market targeting, price positioning, new product strategies and so on.” Although anonymised, it’s difficult to disagree that this information will enable them to “understand local trends, demand patterns etc associated with Autocab client companies.”

Short Term Gain vs Long Term Pain

Can Uber really work with operators when they’ve been so used to fighting against them? Some firms may feel that Uber’s presence will help stimulate interest. The firm’s brand presence might mean jobs being fed into regional markets that wouldn’t otherwise have been on offer. Unsurprisingly, Walsh is highly sceptical regarding the long term benefits of forging a new trading relationship with the firm. He claims, “Autocab customers are being baited with the short-term promise of additional bookings, but taking this bait ultimately hands power over to Uber and strengthens their hand as they continue in their efforts to bring about the demise of the independent taxi industry.”

Job Generation

Autocab is trying to make the point that Uber will create new demand and highlights the large number of requests that the Uber app receives from regions that it doesn’t operate in. Though after the customer makes a booking via the Uber app for the first time they potentially will use it as their default booking system. In which case the operator will end up paying a commission for a fare that they could well have received in any case. They may eventually also face their commissions being squeezed in the same way that drivers have seen their remuneration reduced over time?

Stick or Twist?

If operators decide to work with Uber there’s little doubt that the firm will be able to build a foothold in areas where previously its struggled to gain traction. However, there are numerous other taxi and private hire dispatch software system providers for taxi and private hire firms to work with, such as iCabbi and Cordic. It will be very interesting to see how many operators switch systems and how many decide to dance with the devil in the hope increased revenue streams?

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