Toronto鈥檚 cap on the number of gas-burning Uber and Lyft vehicles on Toronto鈥檚 streets stands to disrupt an industry that critics say is unfair to its drivers 鈥 but it鈥檚 difficult to know what the exact effects will be, experts say.
The city temporarily froze the issuance of new licences to private transportation companies, like Uber and Lyft, at current levels, about 52,000. The move came in a surprise council vote Wednesday supported by Mayor Olivia Chow.
The freeze is expected to last about a year until city staff deliver a report on further regulating the industry and making it more sustainable. New licences may still be granted to drivers with zero emission vehicles.
The cap was introduced as part of a broader motion requiring taxis and rideshare vehicles to have zero emissions by 2030.
Speaking to reporters Thursday, Chow said it鈥檚 a 鈥渢emporary moratorium鈥 on new licences until city staff determine the appropriate number of rideshare vehicles in Toronto, taking into account rider wages, greenhouse gas emissions and congestion.
鈥淚f there are drivers that are not driving, then those new licences will continue so there鈥檚 really no loss of licences. It鈥檚 the same number. It鈥檚 just no increase, which I think is appropriate,鈥 she said.
Here鈥檚 what Toronto鈥檚 cap on rideshare licences could mean for drivers, riders, and private transportation companies.
Drivers already with licences win
鈥淚f I were a driver who currently has a licence with Uber or Lyft I would feel very positively about this,鈥 said Sunil Johal, David Ann Wilson professor in public policy and society at the University of Toronto鈥檚 Victoria College.
Earla Phillips, a rideshare driver for the past eight years, cheered the move, saying it will improve driver鈥檚 wages by reducing competition for rides. Even during rush hour, she said, it can be hard for drivers to find rides because of how many cars there are on the road.
鈥淒rivers for months and months, this entire year really, have been expressing their frustration at being out on the road for hours and hours, and sometimes not even making $100.鈥 Phillips said limiting the number of drivers will mean that drivers are able to be more efficient and make more money.
However, limiting licences only benefits people with licences, and reduces the earning opportunities for future drivers who may look to ride share to earn extra income, said Ming Hu, professor of operations management at the Rotman School of Management.
Alison Kemper, associate professor of entrepreneurship and strategy at 海角社区官网Metropolitan University, said there鈥檚 no guarantee that additional income will go to drivers, because they lack power relative to large rideshare companies that set prices and decide how much money goes to the drivers themselves. Drivers鈥 costs are also likely to go up the more trips they take, she added.
Johal said it鈥檚 still an 鈥渙pen question鈥 as to whether private transportation companies will pocket any additional wages.
鈥淭heir business model is to squeeze drivers as much as they can and charge passengers as much as they can on the other side,鈥 he said.
Riders may look elsewhere for transportation
So, will fares go up? It depends. Assuming both demand and supply stay equal, prices should remain steady, Johal said. But if demand goes up, and rideshare companies aren鈥檛 allowed to issue new licences, prices will increase, he said.
Capping the number of rideshare vehicles allowed to operate in the city is likely to have three main effects for riders, Hu said. As demand outpaces supply, prices will go up, and riders will have to wait longer for a car, he said. However, with fewer cars on the road, congestion is also likely to improve.
As a result of the inflated prices, riders may opt for other transportation methods, such as public transit, cycling, or driving their personal vehicles.
鈥淐onsumers want to have their car there in two minutes. But the reality of it is that the logistics of having that means the drivers are suffering,鈥 said Phillips, the rideshare driver.
Rideshare companies not happy with licence cap
While Uber and Lyft have supported Toronto鈥檚 plan to electrify the rideshare industry by 2030, neither is happy with council鈥檚 cap on licences.
Uber said in a statement Wednesday it 鈥渨ill be reviewing all legal options鈥 to fight the cap, which the company said will increase wait times and hurt both riders and drivers, while Lyft called it 鈥渃ounterproductive.鈥
Because Uber is a global company and its value is based on future revenues rather than current revenues, this policy is unlikely to hurt its value, Kemper said. But if other cities follow Toronto鈥檚 lead, it could threaten Uber and other rideshare companies鈥 business models.
鈥淯ber has counted for all of its history on the ability to keep recruiting new drivers 鈥 as many people as want to come in 鈥 and making that a free and open market,鈥 Kemper said. By freezing licences, the city is changing the dynamics of the labour markets for private transportation companies.
With a limited number of rideshare vehicles allowed to operate, Uber and Lyft will have to be more thoughtful about who they hire, Johal said, prioritizing drivers who want to work long-term and drive longer hours. One positive consequence of that is it could put market pressure on rideshare companies to compensate employees 鈥 who often work precariously for low wages 鈥 more fairly, he added.
Correction 鈥 Oct. 13, 2023. Uber, Lyft and the ride hailing industry overall in 海角社区官网are already regulated by the city. A prior version of this story incorrectly stated the city is looking into regulating the industry and that the industry has gone 鈥渓argely unregulated.鈥
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