Uber vs. Taxis: The Street Fight Between the Transport Services

They stand unprotected in the blazing midday sun: taxi drivers in high-visibility vests hold up signs reading: "Fair competition instead of social dumping" and "Minimum prices for all." The latter is accompanied by numerous exclamation marks. On Tuesday, the taxi industry's nationwide protests began in Frankfurt, right in front of the city hall (Römer). Demonstrations and car convoys will follow on Wednesday in more than a dozen other cities. Herwig Kollar, President of the Federal Association of Taxis and Rental Cars, calls this an "existentially threatening situation."

Competition from chauffeur-driven rental cars is making life difficult for the long-established industry. They have already lost about a quarter of their market share to rivals like Bolt and, in particular, Uber. Taxi drivers outside Römer repeatedly chant, "Uber gone!"

The German subsidiary of the US company isn't actually a ride-hailing company, but rather an online platform that accepts orders from customers and passes them on to drivers. These drivers, in turn, are employees of rental car companies. Uber, Bolt, and others charge commission fees for this.

Transportation this way is usually considerably cheaper than taking a beige taxi. Price competition is becoming increasingly fierce on city streets.

The taxi drivers keep chanting: "Uber away"

Source: Jeff Chiu/AP/dpa

This has a lot to do with different regulations: Taxi fares are set by local authorities. There are no price restrictions for rental car and chauffeur-driven services, even though both provide the same service: transporting customers from A to B.

"The debate about minimum prices for rental cars with drivers is not only justified, but long overdue. There can be no fair competition if two identical services are regulated differently," Alexander Mönch told the RedaktionsNetzwerk Deutschland (RND). Mönch is the head of the local branch of Free Now, a pioneer among new mobility services.

The company also arranges rides with its app and has now specialized in cooperation with taxi companies, but has also gained extensive experience with rental cars in the past. "Price competition is not only ruinous—it is structurally designed in such a way that ultimately neither drivers nor customers benefit. This cannot be a future model for urban mobility," explains Mönch.

An Uber spokesperson, however, emphasized to RND: "The call for more regulation does not improve the situation, but harms everyone." He added: "With minimum prices for rental cars, there would not be more passengers for taxis, but rather people would increasingly be driven back into their own cars."

Taxi fares in Germany are very high, and for many people, taxi rides have become a luxury. "This also leads to taxis only being used at a quarter of their capacity," said the Uber spokesperson. He emphasized that the utilization rate for rental car companies is more than 50 percent. Forward-looking solutions for modern mobility and more competition are now needed.

From the perspective of taxi president Kollar, Uber's calculations aren't working. "The extremely low prices can't be achieved solely by increasing capacity. This is due to the fact that traffic flow in cities – about 20 kilometers per hour on average – limits the number of possible trips."

Kollar also points to a scientific study that found that new rental car providers are massively subsidized by Uber to achieve extremely low rates. These subsidies are then gradually reduced. "This encourages social security and tax fraud, as well as illegal work, which has been clearly proven by investigations by public prosecutors. Criminal milieus are emerging."

At the beginning of the year, more than 100 cars were seized in a spectacular operation against 30 rental car operators. Among other things, police found €238,000 in cash in the freezer of the main suspect's apartment. The investigation is underway for illegal employment, serious tax evasion, and forgery. The Frankfurt public prosecutor's office emphasizes that the investigation is expressly not directed against the companies Uber and Bolt.

Meanwhile, Kollar sees the responsibility primarily not with law enforcement agencies, but with those responsible in Frankfurt's Römer and many other city administrations: "The legal framework was created years ago. The cities must now implement the requirements." There are some approaches to minimum ride-hailing prices. But in many cases, there is fear in city halls "because Uber is taking legal action against any form of regulation of the rental car business."

The taxi president, however, recommends that mayors take a look at Uber's home country, New York: There, on the one hand, driver pay is mandated. At the same time, clear guidelines are set for calculating vehicle costs. "Both factors combined prevent price dumping, as this sets a lower limit for rental car rates. This leads to fair conditions for the taxi industry."