Ride-hailing in Austin has suddenly become a much more competitive market. After Uber and Lyft left town last spring, leaving a hole in the market filled by other startups and new companies, the two biggest transportation network companies returned to town late last month, after Texas passed HB 100, a law that created statewide ride-hailing regulations that supersede Austin’s rules.
The return of the two biggest companies to a city that adjusted to a more independent, wide-open transportation market comes at an interesting time. With Uber’s reputation in free-fall due to numerous crises and incidents of executive misbehavior, does this new competition offer a testing ground for public sentiment and the viability of a different kind of ride-hailing company?
Here’s how riders, drivers, and ride-hailing companies are adapting to the new market reality in the Texas capital.
The shift has been sudden
The big players didn’t waste time making their presence felt. According to a Medium post by Andy Tryba, CEO of RideAustin, the local nonprofit that started up as soon as the two big players left the market, the service saw trip volumes drop 55 percent in the first week, from 58,700 to 26,000 (a figure that factors in the seasonality drop from UT students graduating and going home).
“The market power of the giants is undoubtedly significant,” he wrote.
Uber and Lyftboth invested big money into luring back driver. Uber offered $25 off—$5 off for each of the next 5 rides—while Lyft gave users half off rides, with a limit of $5 per ride for four total rides.
According to Kirill Evdakov, the founder of Fasten, the Boston-based ride-hailing startup that quickly opened in Austin last spring, the company saw a 16 percent decline due to Uber and Lyft’s return. But he thinks the impact of their return, especially in the long term, is overstated. While it’s tough to convince visitors to switch to new apps, making it certain the new competitors will lose a sizable chunk of the lucrative tourist market, local riders, who make up the bulk of the ride-hailing business in town, will still passionately support local business.
“There’s a stereotype that Uber is the cheapest option, but our rates are the same,” Evdakov says. “We just take less from drivers. We say that it costs nothing to do the right thing. Your ride home costs the same with us, just the driver takes home more money.”
The mayor isn’t happy
Why should he be, after state legislators overturned his community’s ability to enact safety measures it felt was necessary? After the passage of HB 100, his office released the following statement:
"I’m disappointed that the legislature chose to nullify the bedrock principles of self-governance and limited government by imposing regulations on our city over the objection of Austin voters. Our city should be proud of how we filled the gap created when Uber and Lyft left, and we now must hope that they return ready to compete in a way that reflects Austin’s values."
Uber and Lyft want to reintroduce themselves
Uber spokesman Travis Considine told the Texas Tribune that, "Austin is an incubator for technology and entrepreneurship, and we are excited to be back in the mix. We know that we have a lot of work to do in the city, but we couldn’t be more excited for the road ahead."
According to Lyft Austin General Manager Aaron Fox, the company is making an effort to make more local connections and “be the best platform for drivers and the best service and most affordable option for riders.” The company is partnering with local businesses, and after re-launch last month, began to offer special deals at select Austin restaurants. In addition, the company has local non-profit partners that they’ll be announcing soon, and in the interim, have donated 100 man-hours to roadside clean up and worked on a food donation event for Capital Area Food Bank.
The company has found that many users still have the app installed on their phone, making it easier to reestablish service.
“We have heard from many Austinites that they frequently use Lyft when they travel,” says Fox.
Will Austinites forgive Uber and Lyft?
Since both of the dominant ride-hailing companies spent millions to defeat Austin’s ride-hailing restriction via a referendum, failed, then spent millions on lobbyists to help pass a state law that invalidated the city’s law, it’s fair to say some may be unhappy at the company’s legal tactics.
For many, this may represent a test of the company’s public personas, especially Uber: will the public’s desire (and maybe even dependance) on this technology mean they’ll forgive past deeds and bad behavior in the name of a more stress-free commute?
“Industry analysts will be watching closely to see how Austin passengers respond to Uber’s re-introduction to the local market,” says Dave Sutton, a spokesperson for the taxi-industry group Who’s Driving You? “Uber will almost certainly use its enormous venture funding to subsidize cheap fares and undercut the homegrown transportation competition.”
Austin riders, in many ways, are presented with a unique choice, he says. Since they have homegrown options, will they reject the big companies in favor of smaller and/or local firms trying to position themselves as more progressive.
There will be a price war
Service and brand are important, but price can be the all-important factor for ride-hailing market share. That became quickly apparent when RideAustin announced on June 13 that they would be cutting fares to (just barely) undercut the competition. Rides will be 99 cents a mile and 20 cents a minute; Uber and Lyft both charge $1 a mile and 20 cents a minute.
“Though RideAustin is the lowest operating expense rideshare—honestly—we were the last to lower pricing due to the impact on drivers,” explains RideAustin CEO Tryba in a statement. “However, it’s unarguable that extreme price sensitivity in the rideshare market exists and we had to match the new Austin market rates. Fortunately, due to our driver pay model—we will continue to pay drivers significantly more than Uber & Lyft,”
Rider (and driver) loyalty is up for grabs
Every company feels additional pressure to shore up support with staff and customers. This weekend, Fasten will host FastenFest, an all-day event featuring free food, drink, bands and raffles that will distribute up to $3 million in ride credits.
RideAustin believes they local is enough of a differentiator for the company to maintain a 25 percent market share. But as Tryba wrote in his Medium post, the impact of the big players has been more sudden than they expected, so it’s going to be a battle.