Uber and Lyft Leave Austin, Putting 10,000 Drivers Out of Work
Many tech investors believed that an impending Uber initial public offering would be one of the hottest IPOs of 2016, but those predictions are starting to look like wishful thinking after Uber and Lyft’s latest defeat in Texas.
Even in hip, tech-friendly Austin, the ride sharing companies recently wasted $8.6 million fighting a proposition that would have allowed the companies to “self regulate” their drivers. If self regulation sounds like an oxymoron, then the voters of Austin agree.
Uber and Lyft joined forces in Austin to spend $8.6 million pushing Proposition 1, which would have exempted drivers from mandatory fingerprinting and background checks. Voters rejected the measure 44 to 56, and NPR reported that the companies spent an average of $200 for each losing vote.
Now, the companies are promising to leave Austin altogether. Previously, Uber withdrew from San Antonio over a similar fingerprinting measure and only returned when the city offered concessions.
“Disappointment does not begin to describe how we feel about shutting down operations in Austin,” said Chris Nakutis, general manager of Uber Austin.
Unfortunately, the rules passed by city council don’t allow true ride sharing to operate. Instead, they make it harder for part-time drivers, the heart of Lyft’s peer-to-peer model, to get on the road and harder for passengers to get a ride,” reads a Lyft statement.
Yet around the country, cities like Austin are rejecting the idea that Uber and Lyft operate as true ride sharing companies. While many Uber and Lyft drivers are afraid of or forbidden from speaking to the press, many drivers who work for the service are immigrants. After the Austin vote, Uber reported that 10,000 drivers are out of a job.
Ride sharing companies make a profit by classifying their drivers as “independent contractors” rather than full-time workers. With cities like Seattle, Los Angeles, Chicago, Atlanta, New York City, Houston, and Austin openly questioning that business model, Uber and Lyft’s future looks increasingly uncertain.
After record-breaking tech IPOs in recent years, the IPO market has slowed way down so far in 2016. In the first quarter of 2016, just 11 companies went public — not including the two ride sharing giants — representing a 69% decrease since the previous quarter and a 71% year-over-year decrease.
“We’re not asking them to leave,” said Austin City Councilmember Ann Kitchen. “The voters have spoken and they want these requirements.”
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