Uber's Disruption of the Taxi Industry in Australia

Essay, 2018

7 Pages, Grade: 1.5



Uber has disrupted the Australia Taxi industry by dominating the market because it is easy to access and it is also cheap compared to other transport services such as the taxis. This ride sharing business is well funded by the entrants hence challenging the taxi industry. The taxi drivers are concerned that Uber are not regulated (not bound by the same taxi regulatory structures) implying that they are able to compete in uneven playing field thus getting a competitive advantage over the taxi drivers. The taxi drivers argue that Uber drivers escape the regulatory costs hence making them illegal or unfair in the taxi industry. As a result, this ride sharing business is disrupting the taxi industry according to most of the incumbents in these industries (Harper, 2014).

New Reforms to Mitigate Technology Disruption

The new reforms to compensate taxi drivers have remained a significant topic in Australia today. Following the outcry by the Taxi drivers and other players in the industry, NSW and ACT have implemented reforms so as to compensate taxi drivers following the disruptions by the Uber drivers (New South Wales Government, 2015). In Australia Capital Territory, Western Australia, and New South Wales, the governments have made reforms to accommodate ride sharing business in the Taxi regulatory framework by compensating the taxi drivers for the loss in their revenue attributed with the disruptions by ride sharing business. The ridesharing business in this case Uber will be allowed to operate legally with the licensed taxis although there will be limits in the scope of ride sharing, for instance, privilege will be given to the licensed taxi drivers over the private ridesharing vehicles (Australian Taxi Industry Association, 2015).

New South Wales proposed a policy of compensation to the licensed taxi drivers by $1 levy per ride in taxi with an average taxi license price amounting to $367,000 and the number of taxis are approximately 7347 (taxi licenses). Under these new reforms, the Uber drivers are supposed to acquire a private hire vehicle driver’s authority which is supposed to be provided by the government and also register the vehicle for business use. The NSW compensation scheme announced a $250m industry compensation scheme and $3m for NSW office of small business commissioner to the taxi and hire car industry. For the taxi licenses, the adjustment package comprises of $98m per license and an initial payment of $20,000 per license. A hardship fund of $152m for hire car and taxi licenses was proposed because of these changes (Lawson, 2015). The ACT compensation reforms by 2014 shows that the taxi count was 316 and the compensation price was $247,000 (ACT Government, 2016).

The NSW for instance, represents all taxi networks, operators, and owners in Australia to ensure that the industry is well operated. Following the material loss of income and value by the industry incumbent such as the taxi drivers, NSW and ACT provided a meaningful compensation to them so as to avoid any future loss in the industry. The transport industry is becoming very competitive following the introduction of the new technology such as the Uber implying that as the market becomes more competitive, there are more pressures to reduce costs as Uber is currently doing (New South Wales Government, 2015, p.28). That said, NSW sought to compensate the taxi drivers because of the reduction in their total revenue attributed to the reduced costs which has acted as a cost burden to them. From 2003 to 1006, the NSW used the capital value of a taxi license as the most appropriate way to compensate the taxi drivers. Approximately, 150 taxi licenses had their capital valued so as to provide a reasonable return to those affected by the Uber disruptions in the future (Hara, 2011).

The compensation adjustments by NSW and ACT are sufficient to compensate the taxi drivers although they vary based on the regulatory environment. Different approaches of compensation have being made with considerations based on the number of taxis licenses both in the metropolitan and non-metropolitan areas, the method of issue, investment price, and segmentation of the industry under regulation (Davies, 2014).

The societal changes that have enabled the rise of ride-sharing businesses such as Uber

Innovation and technology changes in the society have allowed ride sharing business to grow in Australia such as the growth of Uber. At the start of the 21st century, consumers faced a recession thus changing their way of living thus resulting into a sharing economy whose main focus was to relieve economic pressures, focus on innovative technologies, and simplicity when using these technologies. The demands for a sharing economy, therefore, resulted into ride-sharing businesses such as Uber, which is a mobile app that connects riders with drivers in a more efficient and convenient way. It is an alternative to taxi as it connects riders to derivers thus; making it easy to access cities conveniently (Russell, 2012).

The demand for low cost services such as waiting time also resulted to the rise of the ride sharing business such as Uber. Consumers are continuously looking for a service that they will pay a minimal cost and get the service as quickly as possible. Uber services ensure that consumers do not stand on the streets waiting for cabs or call a dispatcher and then wait. Uber also provides a better overview of quality and service in the transportation industry because consumers are able to rate the drivers and if their rating falls below the threshold depending on consumer experience, they are removed from the market (Harper, 2014).

Increase in living standards by most of the people in Australia has led to the increase of the ridesharing business. Australia is one of the emerging economies that have experienced increase in economic growth over the years thus resulting into more redefined industries such as the ridesharing business with the society benefiting from these changes. Most of the users have reported increase productivity and performance with more jobs being created for the young people hence benefiting the society. Accessibility and flexibility of the ridesharing business in Australia has also attracted demand by most of the users because they are able to connect different cities at the minimal time possible hence saving cost.


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Uber's Disruption of the Taxi Industry in Australia
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uber, disruption, taxi, industry, australia
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Caroline Mutuku (Author), 2018, Uber's Disruption of the Taxi Industry in Australia, Munich, GRIN Verlag, https://www.grin.com/document/432473


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