Since the advent of Uber, Lyft, and other Transportation Network Companies (TNC’s), taxi businesses like Los Angeles Yellow Cab have been exploring ways to reinvent their business models and claim back lost revenue from their new, less regulated competitors. Over the last decade, with the passage of AB1069 which eased regulatory burdens on Taxis and a pivot to more contract work, taxi cabs have begun to recover. On the other side of the street, TNCs are now looking to fill the gaps in their own service by teaming up with the once-upon-a-time enemy cab companies, with Uber and LA Yellow Cab being the most recent of those collaborations. VX News spoke with Bill Rouse, CEO of Southern California taxi operations, about his new partnership and the collaborative benefits to be seen by taxi operators. Rouse also addresses the taxi industry future, the not-so-threatening robotaxi business, and future groundside operations at LAX.
VX News: During our last interview in 2015, you stated that in order for taxis to survive, “we're going to have to see major changes on the regulatory and business side.” Eight years later, has anything changed?
Bill Rouse: Yes, quite a bit. The first thing is the signing and passage of the AB 1069 bill. Going into effect in 2017, it reduced the regulatory burden to a maximum of two jurisdictions per county. This allowed taxi companies to operate on a county basis, so if you're licensed in a city like Los Angeles that does fingerprints, vehicle inspections, and the like, then once you have that license, you can operate anywhere in the county. This coupled with other details in the bill lightened the regulatory burden for our entire industry and stopped cities from charging really exorbitant franchise fees. Overall, it ended up saving us not only the headache but also the fees and gave us the ability to speed up the driver onboarding process. It just made it a lot easier to compete with the TNCs.
Our taxi administrator, Jarvis Murray, is one of the most forward-thinking taxi regulators in the entire country. He's used his authority to basically waive rules which led to the reduction of the cost structure for owners. You now see that nearly half of our fleet has what we call ‘light non-destructive branding.’ The stickers we used to have had this super sticky adhesive that always destroyed the paint during removal, but we changed them. None of our equipment is drilled into a vehicle any longer so they’re not destroyed. This has led to some owners offering more expensive or fully electric vehicles that they wouldn’t have risked destroying in the past. You're not going to want to destroy and alter a vehicle that you spent $50,000 on. Now you can dip your toes in the water to explore the alternative value of using a personal vehicle as a taxi cab. So, vehicle cost and the business model of how you invest a vehicle have changed but also the driver onboarding process has improved. Maybe there are a few other things that need to be worked on there, but the onboarding process time has been reduced. It used to take sometimes a month and a half to onboard a driver. You can't compete with Uber and Lyft if you're taking a month and a half, right?
Now we're looking to address this LA-specific blanket rule that all new taxi cabs have to be hybrids unless they’re wheelchair-accessible vans. We’re just finishing up a study that we commissioned with Gladstein Leandros and Associates pointing out the obvious; some vehicles that are non-hybrid are actually cleaner than some hybrids. What we're trying to do with this finding is to make it easier to onboard drivers who already have vehicles (i.e. Uber and Lyft Drivers) that don't happen to be hybrids but also don’t pollute. I think we're going to get that rule changed and it'll really help our industry.
Elaborate on the impact of rideshare on a passenger-riding market once dominated by taxis? How’s this market evolving.
The impact on our retail businesses has really been devastating. By retail, I'm talking about any private individual who might take a taxi, to work, around the city, or transient travelers in Los Angeles at the airport and hotels, etc. That whole sector of our business, which was so strong in 2012, has been impacted so much that it's very hard to even support a night fleet in the taxi industry. What we have to offer to a taxi-riding passenger is limited to certain hours of the day. That’s the first part.
We've also had to pivot by developing more accounts; government businesses, hospitals, the education sector, and the like. People value what we offer as with 24/7 insurance, and fingerprinted drivers driving inspected vehicles, so we've done a great job of pivoting and further developing our business there. These are opportunities for drivers to go out and earn good money in the taxi industry but this business takes place mostly during the day. So again, the night business has really been negatively impacted.
Over the last 10-years, since rideshare was introduced as the non-regulated darling of the market competing against a highly regulated taxi industry, has the taxi business model evolved?
Yes, the dynamic has changed in some ways, while in others, stayed the same. In business, if you're in a declining revenue model, you can’t unilaterally cut your price. We're competing in a situation where our competition is taking billion-dollar investments to buy down their price. So they aren’t and haven’t been offering their product at full cost, as evidenced by the magnitude of the losses they're willing to absorb. Since we know that the only revenue in this business is through the farebox, for them to reach the breakeven point and be profitable, it has to come from the fares that they charge their passengers.
We have been impacted by that and I'm not sure that the dynamic has really changed. On the other hand, we've survived and even thrived with different kinds of business. Now, we’re excited to announce this new partnership with Uber which gives them access to our vehicles that are on our platform from the Mexican border to the northern edge of LA County, around coastal Southern California. This will provide additional trips over and above what our drivers are currently getting and, you know, I spoke about the issues with the night business of cabs. I'm most excited about the business prospect of supplementing these additional trips. I think it’ll give us a fighting chance to get the cabs back out on the road at night and become more of a 24-hour cab company like we used to be.
Could you elaborate on the new deal you have with Uber, its underlying business benefits, and what it portends? Have similar arrangements between taxis and Uber been replicated in other cities?
From the passenger side, when a taxi is the closest vehicle in proximity to the passenger, they receive a message that displays this information with the option to accept. Once the passenger accepts, the taxicab gets dispatched and then they know that a taxi is coming. This moves the ride out of the TNC (Transportation Network Companies) regulatory framework and into the taxi regulatory framework. The passenger knows they're getting a cab at the Uber X price which was already agreed on, so there won't be any friction points on the passenger side.
Some other good news is that we have 1200 vehicles in this giant, Southern California service area and additional supply will mean faster service and better reliability for Uber’s passengers. Benefits on our side, as I’ve mentioned before, is added income for our drivers over and above what they already have. It's also income added at several times of the day when we're short of critical income which is going to help us to build the fleet at the end of our night business. Many of our drivers prefer to work at night so this allows them to go back to doing that. Then, the other part is early morning airport rides. Taxicab drivers love early morning airport rides when there's no traffic so this allows them to make a lot of money between the hours of, let's say, 3 to 4 am and 7 to 8 am. The TNCs have supply issues during those times so I think it's going to be a benefit for everybody.
Historically speaking, Uber reached out to the taxicab industry in 2021. They acquired a taxi dispatch platform called Autocab with a significant market share in the UK, in early 2021. Uber then started to reach out to the taxi industry in the Fall of 2021. The first taxis in the US to start taking Uber trips were in New York City, with San Francisco’s starting in early 2023. We've actually taken our first couple of trips to San Diego.
Metro has just re-authorized its own shared-ride service, Metro Micro.
Reportedly, it takes last-mile passengers to their zoned destination for a one-dollar fare trip augmented by a Metro subsidy of forty dollars. Your reaction?
I mean, it sounds like a really expensive dial-ride program if you ask me. We've been doing dial-rides since the 1970s and it sounds to me like the cab fare would be a lot cheaper. You can go a long way on forty dollars in a taxicab, but if that's what they want to do… It just sounds way too expensive. We actually have our own dial-ride programs for around seventeen dollars a ride, which is far less than this Metro Micro program.
Pivoting to Robo-taxis, San Francisco has taken Cruise Robo-taxis off the road. As an established operator and administrator of large fleets, what’s your take on robotaxis? Any thoughts on their potential?
I don't see them as an existential threat to the kind of business that we serve. Due to the pivots we’ve made since Uber and Lyft to doing more contract work and non-emergency medical work, I don't see any way you could completely automate away the driver. It's one thing to automate driving, but we do a lot more than just drive with our passengers. Whether we're talking about special needs school children or accessibility; you're just not going to put four disabled kids into a vehicle that doesn't have a driver. So, considering the rise and interest of robotaxis, they aren’t particularly a threat to what has now become our core business, which is specialized contract work.
On the other hand of what you see on the news and related matters, there's a lot of outcry from public officials in San Francisco trying to bring a dose of reality to the brave new world thinking about automated vehicles. I think you're seeing just how difficult it is to deploy these technologies in an urban environment.
Pivoting to LAX, could you speak to the health and potential of the airport/taxi business; and what the future portends given the landside investments in parking and public transit being made in advance of the LA 2028 Olympics?
When they opened the LAX lot in 2019, the demand for our services was negatively impacted. Then, the pandemic came and demand essentially dropped to zero. Post-pandemic, the numbers came roaring back to a point that we hadn't seen in many years on a per-car basis. Now it's kind of settled back into something you could classify as a revenue norm in terms of a drivers’ day at the airport. As a reminder, drivers rotate in and out of serving the airport. What used to be one day is now one and a half out of five days, so if that ends up being the taxicab’s big revenue day, then their street business would supplement that.
The airport’s automated people mover is planned to open around late 2024 and once that opens, they can start construction on the new terminal zero which is to take place right where the loading lot for taxis and TNCs is today. They’re talking about somehow apportioning the demand for taxis and TNCs between the central terminal area, ITF, and the new LAX lots at ITF West. Currently in the discussion about this, the airport has been very good about having stakeholder meetings. We ask them to examine this question of how exactly the demand is going to split because taxis don't get the benefit of any doubts from the consumer. The idea that I could leave baggage claim, see a taxi, and not be allowed to take it for some reason-- that's not going to reflect well on the taxi product or the airport. The consumer instantly assumes malicious intent. We ask them to look at these questions and to consider traffic mitigation efforts.
Someone needs to look at the amount of trips that we actually do and then decide whether it’s really significant in terms of traffic impact-- we don't think it is. Given that we have always cooperated with the airport, we want to continue that cooperation. We're willing to be totally creative as need be. Hopefully, it'll work out in a way that doesn't further negatively impact the demand for our services.
Bill, you were once the President of the Taxicab Limousine & Paratransit Association (TPLA), which is the industry's international taxicab trade association. You are now serving your second term as President of the Taxicab Paratransit Association of California (TPAC), the industry’s statewide trade association.
Talk about your experience industry-wide and internationally; the value proposition for taxis, what they've gone through in competition with rideshare services, and what you see for them in the future of the market.
I think every city that I know of has had a negative impact from TNCs and the TNC model. From my own personal observation, the cities that see the least impact are the ones that have the most scale to begin with. In a city like Rio de Janeiro, there are 14,000 taxicabs within a city with a similar metro population to Los Angeles, roughly 15 million. Obviously, it is a lot denser and less spread out. There are still 14,000 taxicabs there compared to LA's 2000. So, when the taxicab had enough initial supply to serve the customer, people didn't feel so choked off from transportation. Then the taxicab survived against the TNC’s onslaught of supply because supply equals service reliability and fast service.
As you look industry-wide, you see cities where the taxi supply was tamped down for whatever objectives were at the time and you saw taxis get clobbered. In our own situation at LA Yellow Cab, on the eve of Uber and Lyft coming to Southern California, we had 2,000 unserved orders every Friday and Saturday. We clearly had demand in LA, a city that was really urbanizing with changing demographics through the development of downtown as a place to live and work-- those should all drive taxi demand. Yet, the city was not responding with additional taxis and the TNCs ate our lunch.
Today, we've had to pivot away from that business and we’re doing fine in the contract world. We continue to try to develop that but hopefully this deal with Uber, which is going to add revenue for our drivers, is just additional money. The TNCs have supply shortages at times when we can help them and so I think that's why they sought us out.
Let's drill down on supply shortages, a manpower workforce issue. The pandemic obviously impacted that as well as post-pandemic patterns of mobility. Could you talk about the workforce situation for the taxi industry?
Everybody's in the same labor market. You can't divorce yourself from the labor market. Even though our daily revenue figures are strong, in the past, taxis were always seen as a purist supply and demand model. Revenue would dip and drivers would leave or supply would dip and then revenue grew, encouraging new drivers into the business. The state of the current labor market post-pandemic has defied all of those old rules. We had a time in 2022 when the taxis were grossing between $500 to $600 a day. In the past, that would have led to a big influx of drivers but it didn’t. Yes, we grew nicely in 2022, but I really felt like our potential wasn't reached as a product of the labor market.
I want to pivot now to issues related to climate change, fueling, and emissions. Talk about how the last 5 to 10 years of policy initiatives have affected your industry.
Keeping in mind that this is a driver-owned industry, the operator of a given vehicle chooses their own vehicle, and that obviously needs to be an income-generating vehicle. In 2006, we were almost entirely Crown Victorias and upon one of the first real severe gas price spikes, I remember going to shareholder meetings asking what we planned to do about these gas prices. My response was to buy less gas because, at that time, we had models in Vancouver, Phoenix, and other cities where the Prius was efficient as a taxicab-- the interior space is more generous than it looks on the outside and it cut your fuel expense overnight by two thirds. Today's Priuses are even more fuel-efficient than those we first took interest in.
Now we get to the point where fuel savings, considering gas prices, can actually pay for a fully electric vehicle. Before, when fuel costs were low, fuel savings couldn't reach that trade-off from a basic dollar proposition; cost of vehicle plus cost of fuel versus the overall cost of an electric vehicle. I've been an electric vehicle driver for only eight years or so which makes me able to experience all these challenges first-hand.
I think there are other issues with electric vehicles that are keeping our owners from embracing them-- parts, supply chain issues, repairs-- I mean Tesla is notorious for taking months to deliver a hood. You can't stake your family's livelihood on that kind of vehicle whereas, given the abundance of Priuses, there's always an abundance of used Prius parts. So, you see owners being conservative, as they always have been before, as they come to embrace electric vehicles. On the other hand, we're in discussion with a couple of EV suppliers to maybe seeding the supply in order to get it started so that we can demonstrate that this does in fact work. However, you need 300 miles of travel range because range anxiety sets in at 50 meaning you really have 250 miles for a 300-mile vehicle.
Less than a decade ago, New York City's taxi administrators went through the process of trying to design and mandate a particular vehicle. Is this the way that cities should go? Or should we rely on our operators to pick their own vehicles?
We need to rely on operators to choose their own vehicles. I don't think that the Nissan NV200 is particularly great, it feels like a rattletrap to me. Anytime you try to come up with a top-down approach in this market where we are already desperate to bring on drivers with cars, it just turns drivers away. We need to rebuild our industry by making it easier to onboard drivers with their own clean cars but, you know, New York has always been and will continue to be a different kind of market. I'm not sure I would call their approach a success.
Lastly, you've been asked, because of your experience in this industry and internationally, to offer advice and counsel when airports or transportation agencies are proposing change. Could you talk a little about your point of view on the policy processes of regulating the transportation business?
Well, there are two things.
Specifically, with respect to airports, I tell regulators that they need to envision a successful taxi industry operating side by side with Uber and Lyft. They've got to look at everything, but the most important things are, again, driver and vehicle onboarding. Somehow, someway, we've got to break the logjam and allow people to come to drive taxicabs faster and bring their vehicles along with them. In the aging population of existing taxicab owners, many of them are deciding that once this vehicle ages out, they're done. They've been waiting for retirement and this is it. Unless we learn how to go attract those Uber and Lyft drivers, we're going to be dealing with shrinking fleets.
The second biggest problem for LAX, and I've told them this, is a lack of accountability. There’s poor service by taxi drivers at LAX. I'm sure you're shocked to hear this.. but in my opinion the problem has been the franchise system. The franchises were developed to give the city a hammer over the cab companies and require more accountability on behalf of the cab companies, but the opposite ended up happening. They ended up giving every driver a sense of entitlement; no matter how a passenger is treated, we're just going to line up and get the next passenger. I think that's done a disservice to the taxi for the public but also for the greater industry because most passengers can’t distinguish between cab companies. Bad service chases away passengers from our industry, regardless of the source of the bad service, whether it's from that company or this company. I think the new system at LAX is going to have to have more accountability. It's going to have to use technology in ways to address problematic drivers.
Today, on our app or online dispatch system, more than 50% of our trips are upfront prices based on live traffic. We take into account the actual traffic conditions when we compute your fare, or we go algorithmically for planning trips based on predictive traffic. We take the traffic into account to predict the wait time component of the meter and right now, we have a rate of over 50% uptake by the passengers. They're clearly voting in favor of this upfront price. They don't like the meter and the TNCs also taught us that. Something like that at the airport could address a chronic problem with overcharges. We need to begin utilizing technology to address consumer preferences and I think this is the direction the airport needs to go.
Looking forward four years to the Olympics in LA, is the taxi business ready to support this event?
I think the taxi business has always been a tough business. You don't design any part of a business to be useful for only two weeks, especially for two weeks five years from now. Still, we hope that we can be part of the transportation planning process for the Olympics. While we want our drivers to get well compensated during that time, we've got a lot of work to do in terms of building the business back to where it was.