August 9, 2018

New York votes to limit rideshares, a huge pre-IPO blow to Uber and Lyft

NYC passed a landmark cap on the number of ridesharing permits allowed in the city, a huge blow to Uber and Lyft as they plan for their future IPOs.

The New York City Council voted to cap the number of ride-hailing cars, a controversial decision that makes NYC the first major city to limit them.

For Uber and Lyft, this year-long freeze on new licenses in their largest market is the biggest setback yet in the war against NYC regulators — and the timing is terrible.

NYC has always protected yellow cabs with rideshare regulations

In other cities, anyone who passes a background check can drive for Uber and Lyft, but NYC drivers must register as ‘for-hire vehicles’ with the Taxi and Limousine Commission.

But, when NYC Mayor Bill de Blasio introduced a 2015 bill to cap the number of for-hire vehicles, an aggressive Uber TV ad campaign pressured the city council to vote against a cap.

After the 2015 vote, though, the number of registered ridesharing vehicles has jumped from 12.6k to 80k, increasing Manhattan driving by millions of miles.

No one agrees how the cap will affect the city

According to NYC officials, the cap won’t take “away any service that is offered” but instead “uplift drivers.” Ridesharing companies, however, argue the cap will screw over riders. 

A public policy expert for Lyft claims the cap “will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs” (the NAACP agreed with this assessment).

Regardless of who wins in the long run, New Yorkers will likely pay more and wait longer for Ubers and Lyfts in the immediate future (although cabbies will finally see their medallions regain value).

This loss looks really bad for Uber and Lyft as they plan IPOs

The NYC cap calls into question how well Uber and Lyft will be able to grow if other cities follow up with similar restrictions.

While Uber and Lyft will fight the council’s decision, the signature of Mayor De Blasio (a known Uber-hater) is all that’s left for the ruling to go into effect.

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