Updated: Uber, the San Francisco-based town car reservation service that has recently moved into lower-cost taxis rides, announced Tuesday that it has shut down its New York taxi hailing operation, only months after launching the service. The difficulty in breaking into New York demonstrates the hurdles that startups face working against city regulations for transportation, and especially Uber’s challenges in cities that already have strong taxi cultures.
The company wrote in a blog post that user demand far outstripped available taxis, making it hard to meet the number of requests, and the company was unable to work with the city and get more taxis on the road:
Unfortunately, as many of you have noticed, there haven’t been enough available TAXIs. Demand far out-stripped supply, making you feel pretty lucky when you got a yellow from your iPhone. We did the best we could to get more yellows on the road but New York’s TLC (Taxi and Limousine Commission) put up obstacles and roadblocks in order to squash the effort around e-hail, which they privately have said is legal under the rules. We’ll bite our tongues and keep our frustration here to ourselves.
In September, Uber launched its taxi hailing service in addition to the existing black car service, a major risk in a city that leans heavily on its famous yellow cabs and has a strictly regulated taxi system. Uber had hoped that customer adoption and support of its taxi system would keep it going, but The Verge first reported that taxi drivers have been told Uber will no longer operate in New York and is encouraging them to become town car drivers instead.
Uber has been widely hailed as disrupting the existing taxi and city transportation system, and while it’s not the only such service, it’s been popular with techies and early adopters in cities like San Francisco and London. The company allows users to hail a car with the tap of a finger on a smartphone, take the car to their destination and leave without ever surfacing a credit card or cash. The company bills riders’ credit cards for the rides, which are typically more expensive than taxis. Expanding into taxis and lower-cost rides has been a recent move by Uber to capture a greater portion of the market.
Uber has run into regulatory hurdles in many cities, especially those where the taxis and town cars are more strictly regulated. The company had earlier regulatory problems in New York, where drivers are prohibited from using electronic devices while driving, a key part of Uber’s technology. In Chicago, the company is being sued by taxi companies for pocketing 50 percent of driver tips, and even in California it’s faced opposition from state regulators over insurance issues.