Uber’s race to the bottom: The wheels will come off this controversial business

Uber causes a storm wherever it goes. First, there’s the storm of applause as passengers initially embrace what looks like an exciting, disruptive new technology. Then, there’s the storm of protest as people start to understand what the business model is really all about.

 

Treating taxis as just another tech challenge raises all sorts of questions. Getting into a taxi isn’t like listening to music, ordering a takeaway or watching a movie.

 

First, you need to be certain that your taxi is insured, roadworthy and safe. Uber’s business model isn’t that interested in this bit of the operation. It’s more interested in minimising its responsibilities and maximising its profits. 

 

Uber responds: Competition is good for passengers and drivers

 

While it does have systems to check drivers’ documents (though these have recently been criticised) and says it has its own umbrella insurance, without a proper fleet insurance policy like Addison Lee has, Uber is unable to say definitively – to confirm categorically – that the vehicle that it is sending you has a valid hire and reward policy. This is totally unacceptable.

 

In fact, Uber works hard to distance itself from the very service it offers. When you get into a car ordered with the Uber app, you aren’t getting into an Uber car. You’re getting into a minicab owned and run by a self-employed driver, who just happens to advertise his services on Uber.

 

So if anything goes wrong, you need to take it up with the driver, not with Uber. Reports earlier this month told how a French businessman was in an Uber-booked minicab when it crashed on its way to Heathrow. Dramatic pictures of the car on fire featured in several newspapers.

 

So what did Uber do? According to news reports, it refunded the businessman’s £35 fare and told him to take it up with the driver if he wanted to make an insurance claim. Of course, that’s sometimes easier said than done, since – in this case at least – the driver had stopped using the Uber platform. 

 

The second part of Uber’s business model is the bit that Uber wants you to focus on – the fare. But in the cab business, the fare can directly impact on safety. 

 

When you take a 30 minute journey across town and only pay £10, you may feel pretty good about it. But remember that, out of that £10, Uber takes a minimum of 20 per cent. That’s £2 in this case. This leaves the driver with £8 from which he has to contribute to his petrol, insurance, MOT, private hire licence, car repairs and maintenance, plus try to make a living. When an Uber car needs the brake pads renewing at a cost of £250, can you be sure that a driver struggling to get by is going to do the right thing? There is no company checking that the vehicle is roadworthy week-in, week-out.

 

But the part of the Uber business model that has attracted the most criticism is its propensity to profiteer whenever the opportunity arises. During the Tube strike, Uber hiked its prices by almost 300 per cent. The company calls it surge pricing, but most people think that’s just code for profiteering. 

 

So when you most need a cab during next month’s Tube strike, or on a Friday or Saturday night, always be aware that Uber will be looking to hike its prices simply because they know you won’t have many other options. 

 

One of the biggest concerns about the Uber business model is the explosion of part time cabbies that it encourages, particularly on so-called “surge” nights. These drivers bring with them all the worries about the standards of the cars they use, issues about the quality of the insurance they hold, and even unease about some of the drivers themselves. More than this, because these part-timers tend to emerge during the periods of highest demand, they drive down the earnings of regular drivers when Uber itself is ruthlessly profiteering.

 

This urge to drive up profits at the expense of both customers and drivers is also reflected in Uber’s controversial tax strategy. Uber is registered in the Netherlands and pays little tax in the UK. It even pays a lower rate of VAT than the rest of us. The morality of paying your bit to UK PLC aside, after the travails of the companies dragged before the Parliamentary Public Accounts Committee to justify their tax arrangements, this just looks like bad business.

 

My belief is that some parts of Uber’s business model are not healthy and probably unsustainable. It’s certainly not healthy to transfer all the risk of a global venture onto local self-employed minicab drivers. It’s not sustainable to keep fares so low that safety may be being compromised. And I doubt it is healthy or sustainable for Uber to keep profits outside the countries in which it operates.

 

People across the world are starting to recognise that Uber’s race to the bottom is not in the best long-term interests of either passengers or drivers. It will be interesting to see how long it will take before the wheels really start to come off.