So which is better? Uber or Taxi? This Uber vs Taxi debate is one that is interesting because there are multiple factors to consider. Jemma Castle wrote a terrific article for Choice Australia that highlights this challenging question. In the article, Jemma Castle says:
Uber has well and truly entered the market in Australia, and the app-based transport service has stirred up some heated controversy and opposition from the taxi industry. Much of the kerfuffle is about UberX, a “ride-sharing” service that links passengers with private drivers.
UberX launched in April 2014 and has since facilitated around five million rides. Comparatively, taxis completed around 227 million trips in 2014. In terms of market share, Uber says it’s still early days; however, figures from an Independent Pricing and Regulatory Tribunal survey in February this year found around one in 10 Sydneysiders had used ride-sharing services.
The service currently sits on iffy legal ground, with a number of state governments issuing fines to UberX drivers for offering unauthorised taxi services.
Setting the controversy aside, we set out to test UberX and taxi services and find out which was cheapest and most reliable. We conducted a total of 56 trips across Sydney – 28 UberX rides and 28 taxi rides. All trips were taken in pairs – one test rider in a cab and one in an UberX, both travelling from and to the same place – and distributed across seven different time bands to ensure we captured variations in pricing.
What we found
- UberX was cheaper than a taxi around nine times out of 10. Taxis were 40% more expensive than UberX on average.
- On the three occasions UberX was more expensive, it wasn’t by much – and it was only when surge pricing was in place.
- Of the 28 UberX rides, we encountered surge pricing four times.
- Taxis showed up quicker on average. This, however, was due to the convenience of hailing one off the street; when taxis were booked they tended to take longer to show up than UberX. There were also two times taxis didn’t show up at all, pointing to an issue with reliability.
- On one occasion out of 28, there was no UberX available (the rider caught the next cheapest available option, UberTaxi).
- Taxis scored an average of 6.7 for the overall experience while Uber scored an average of 8.3.
Taxi drivers are essentially self-employed businesspeople, working under the umbrella of one of a number of taxi companies. Drivers will pay a set amount to lease the taxi or give a percentage of the takings. Taxis can be booked in a number of ways – online, over the phone, hailed off the street or through a range of apps, including the Uber app. Payments can be made via cash, credit card, or Cabcharge.
UberX (what we were testing in this investigation) operates wholly through the Uber app, linking up passengers with private drivers using their own cars. Riders can also book a taxi through the app, or use the more premium service, UberBlack. The app detects your location via GPS and connects you with the nearest available driver. The vehicle’s approach can be tracked through the app and the driver’s details are sent to the passenger. Payment is cashless – passengers must enter their credit card details when signing up. If you need to cancel, you have up to five minutes after the driver accepts before you’ll be charged a cancellation fee. Uber takes a 20% cut of the driver’s fare.
At face value, Uber’s pricing is cheaper than taxis, so it’s perhaps no surprise that we found taxis to be more expensive than UberX 89% of the time. For example, in Sydney, UberX costs $0.40 per minute and $1.45 per kilometre, while the maximum taxi rate is $0.94 per minute and $2.19 per kilometre.
However, there are some fundamental differences in the way pricing works between the two services, so an UberX won’t always be cheaper.
Both taxis and UberX charge a rate which is a calculated using time and distance.
- Taxi prices are regulated and have set maximum prices in each state, generally with two to three different price brackets – day rate, overnight rate and peak rates.
- Uber’s pricing is variable and fluctuates with supply and demand, through what it calls ‘surge pricing’. Surge pricing doesn’t happen at a set time; rather, it occurs when demand is high and/or there aren’t enough drivers on the road. At these times the base rate incrementally increases, or ‘surges’.
Given these differences, what’s surprising was how few times surge pricing was actually in place during our test. We encountered surge pricing four out of 28 times, and only to a maximum of 1.5 times the base rate. When surging at this level the UberX didn’t turn out to be much more expensive (an average of 6%) than a taxi (and sometimes it was still cheaper); however, surge pricing can increase well beyond these levels at times of intense demand. Earlier this year, press reports cited an UberBlack trip which cost $213 on New Year’s Eve as a result of surge pricing, when it would normally cost $69.
While you’re warned of surge pricing before you accept a trip, this feature makes pricing unpredictable for consumers. We encountered surge pricing on the weekend, as well as late at night.
- Two instances after midnight on the weekend
- One instance mid-morning on the weekend
- One instance after 10pm midweek
We also found that the Uber app tends to underestimate the likely price. While its fare estimates were generally not too far off the mark, it was usually less than what the price turned out to be, which has the potential to be misleading.
Why are taxis more expensive than UberX?
Despite taxis being significantly more expensive most of the time, taxi drivers certainly aren’t raking it in. Uber says its drivers earn around $30 per hour on average, while a survey of taxi drivers in NSW last year found taxi drivers earn $10–$14 per hour depending on the time of day – well below the minimum wage of $17.29 per hour.
So why do taxis cost so much more? Blair Davies, CEO of the Australian Taxi Industry Association (ATIA), says there are a range of costs associated with running a taxi, such as the training course, the tamper-proof security cameras (which cost around $3000) and commercially priced compulsory third party insurance (roughly $9500 in the ACT he says). But these figures alone don’t quite add up to account for the average 40% price discrepancy we found between taxis and UberX.
The Australian Taxi Drivers Association, which is certainly not pro-Uber, points the finger at taxi networks and taxi plate ‘investors’. Black and White Cabs explains on its website that “there are two ways to generate income from a taxi licence – leasing and management. Either method is currently returning around 5 to 6% per annum or more before tax”.
Former ACCC chairman Allan Fels explained the effect of this on consumers and taxi drivers in the inquiry into the Victorian taxi industry he chaired in 2012: “Victoria’s taxi industry has operated for many years as a ‘closed shop’, with a small number of licence holders protected from the effects of competition at the direct expense of consumers, taxi operators and taxi drivers (who continue to experience low levels of remuneration, poor working conditions and a highly risky work environment).”
While price is no doubt one of the biggest considerations when choosing a point to point passenger service, it’s not everything. Reliability is important, particularly if you need to get somewhere in a hurry.
We found that 16 out of 28 times (57%), UberX took longer to show up than the taxis. This was largely due to the convenience of being able to hail a cab directly off the street. However, for the 10 out of 16 times (62.5%) taxis were booked instead of hailed, the taxi took longer to turn up.
Taxis also presented the problem of no-shows. Of the 28 trips, there were two instances when the booked taxi didn’t show up (this meant they hadn’t arrived within 15 minutes of booking). On one occasion, one of our riders waited for over an hour for a cab that never came.
We put this issue to Davies, who said the taxi industry is aware of the problem. He explained that once a job gets put out to the fleet, if the closest driver doesn’t accept it within seven seconds, it will get sent to the next closest driver, and so on. And if the job has been sitting there for 20 minutes or longer, he says cab drivers know the chances of the passenger still being there are low.
Part of the problem may be that taxi drivers are told the passenger’s destination, which may make short trips less attractive. Uber drivers, on the other hand, aren’t given your destination until they turn up unless you choose to enter it before booking (and you’ll need to do so if you want a fare estimate first).
If you want to highlight the dangers of using Uber or taxis, you’ll no doubt be able to find anecdotal evidence online no matter which one you’re looking at. It’s not possible to comparatively test the safety of these services; nor could we find figures that pointed to either one being dramatically better or worse. For example, the NSW Bureau of Crime Statistics and Research told us that police haven’t yet started reporting any statistics on assaults in Uber cars.
Both services have a range of different mechanisms in place to ensure passengers are safe, so it currently comes down to whether or not you’re satisfied with them.
- Checks: Taxi drivers are required to have a full licence, undergo ongoing criminal history checks and complete a one- or two-week training course.
- Security camera: All taxis are fitted with a tamper-proof security camera.
- GPS tracking: Taxis have hardwired GPS locators.
- Insurance: All taxis are required to be covered by third party insurance which protects customers should there be an accident.
- Checks: Uber drivers must have a full licence and a clean driving record, and must also undergo criminal background checks.
- No anonymity: Passengers are given the driver’s name, photo, vehicle information and contact number, and the trip is kept on record.
- GPS tracking: Once your driver accepts your request, your trip is tracked via GPS on your phone and the driver’s. You are also able to share your ETA with friends or family so they can keep track of your ride.
- Rating system: Drivers are anonymously reviewed by passengers. If a driver’s average rating drops below 4.5 stars out of five Uber will review their feedback and give them tips to improve their service. If they don’t improve, there’s a ‘three strikes and you’re out’ rule. Uber says if there is a serious incident, the driver’s account may be deactivated immediately.
- Insurance: All UberX drivers must have compulsory third party and third party property insurance. Uber also covers all UberX trips with commercial insurance for property damage and bodily injury to the value of $5 million.