The rise of Uber is destroying the traditional taxi business, according to this compelling chart from data compiled by the New York City Taxi and Limousine Commission. It tracks sale prices of taxi "medallions," the expensive licenses that give companies the right to operate a yellow cab:
The data was compiled by Donut Shorts, a Twitter account for investors.
Stocks that track the taxi business are down too (more on that below).
The scariest part — for taxi companies — is the bottom part of the medallion chart, where the blue bars indicate sales coming from foreclosures.
Medallions used to confer on companies a type of monopoly or cartel — you could not operate a taxi in New York without one. Now, however, Uber lets anyone drive a taxi for the entry-level price of merely owning your own car. For many drivers there is simply no point in owning a medallion or working for a medallion company. And so the transaction value of those medallions has dropped off a cliff, even though the economy in New York has gone through the roof.
We haven't seen anything like this in the UK yet, but there are early worrying signs for traditional cab fleets.
Addison Lee, which has a massive fleet of private-hire drivers in London, recently cancelled its planned private equity sale. And then there came word that the company would cut about 90 jobs.
Uber's arrival in London already caused protests from Hackney Cab drivers. When Uber launched in Birmingham, drivers there said they didn't care. "We are not particularly bothered about Uber coming to Birmingham," Mohammed Taj, a member of Birmingham's Black Cab Drivers' Association (BBCD), told the Daily Mail.
The stats from New York suggest cab companies ought to start being bothered a bit more.
Larry Meyers of PDL Capital, writing on Seeking Alpha, points out that the data is not perfect. The number of medallion transactions is minimal, and NYC has increased the number of available medallions. So there is no proof that the correlation of Uber's arrival and the collapse of medallion prices are cause-and-effect. He is bullish on Medallion Financial Corp., the loan company that finances taxi companies ($TAXI) and you can read his case here.
Holders of TAXI better hope he's right, because right now the stock appears to be suffering from Uber overhang:
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