Uber grows 'taxi' market by $50m a year

Ridesharing service Uber isn’t just cannibalising the taxi market with cut-price fares – it’s also growing the size of the market in Australia for point-to-point transport, new research suggests.

Uber-commissioned research by Deloitte Access Economics estimates that uberX grew the market for taxi-style services in Melbourne, Sydney, Brisbane and Perth by $50 million a year, primarily through price competition.

“The average price of uberX services is less than the average fare paid for a taxi,” Deloitte noted in a report. “This price difference encourages those who were otherwise priced out of the taxi market … to use uberX.”

Uber also takes about $31 million of revenue from traditional taxis at its current level, the research found.

Both those monetary figures assumed “no further growth in the Uber business,” Deloitte said. “If Uber’s expansion continues, the total gain [by the market and consumers from Uber’s presence] may be greater.”

While the report notes that revenue upside for uberX may be a downside elsewhere in the transport industry, it makes a case that the downside should offset Uber’s good work.

“It should be noted that there may be a loss of consumer surplus in the taxi market, given the corresponding decreased demand in that market is due to the increase in demand for Uber services,” Deloitte said.

“However, the loss of consumer surplus in the taxi market should not be offset against the consumer surplus gain in the Uber market.

“This is because the demand curve for Uber services shows the willingness to pay for Uber services, given that the alternative is to use taxi services.

“In other words, the willingness of any Uber rider to pay for Uber service is net of the loss of any consumer surplus that he or she would have obtained if taxi services had been utilised.

“Note also that the remaining taxi users have suffered no loss, as prices have not changed in the taxi market.”

While the disruptive hype of Uber is often deafening, it remains a relatively small player in the point-to-point transport space.

Its 12,680 uberX drivers in Sydney, Melbourne, Brisbane and Perth take “around $260 million in fares per year, net of the licensing fee paid to Uber”, Deloitte said.

But taxis dominated the industry.

“In 2014, taxis performed a total of 227.2 million rides,” Deloitte said.

“In contrast, uberX has facilitated approximately 10 million uberX rides in Melbourne, Sydney, Brisbane and Perth since its inception in April 2014.

“Uber represents a small portion of the overall market, with an approximate 6 percent market share in the national point-to-point transport market.”

However, the company is winning some of its battles for legitimacy, being legally able to operate in NSW, WA and the ACT – even if it is yet to win a favourable ruling on its tax status.

Uber used the release of the Deloitte report as an impetus to try to attract more drivers to the service to help it grow its numbers and presence in Australia.