Uber Soft-Launches Black Car Service in Charlotte
A few months ago, a couple friends and I were going out on the town and needed a cab. I got in touch with a dispatcher from Yellow Cab who told me my cab would arrive in about 15-20 minutes. Since I wasn’t in the city, that’s about a normal wait for a cab in Charlotte. About thirty minutes later, I started to get worried. I called the cab company again. “I’m sorry about the inconvenience,” he told me. “I’ll make sure another cab is routed to you.” Ten minutes later, still no cab. We were getting annoyed and called another cab company, just in case we were getting screwed with Yellow Cab. We got another 15-20 minute quote from Crown Cab. I frantically checked on my phone every few minutes for the ETA. Almost an hour after I made the original call, the Yellow Cab finally arrived. As the ordeal was coming to an end, I remember thinking to myself, “Shit, I wish we had Uber in Charlotte.”
And now that wish is coming true, for the most part. Uber soft-launches its black car service UberBLACK in Charlotte today, with Carolina Panthers tight end Greg Olson as the first rider or what Uber calls “rider zero”. The company was here last year to service the Democratic National Convention. If you don’t know what Uber is, it’s a San Francisco technology company that allows people to request rides through its iOS or Android app. It’s as simple as downloading the app, inserting your credit card information and requesting a ride. Uber sends a car to your location with an uniformed driver, who delivers you to your desired destination. The driver shows you the fare, presses a button and the payment is handled.
Since Uber launched, it has received rave reviews from consumers who are fed up with how the current taxi system works. In most markets, regulatory agencies limit competition in the taxi industry in exchange for lower fares. But cheap usually leads to less quality service and the lack of competition reduces the incentive for drivers to improve. Many riders complain about unreliable service, dirty cabs, rude drivers and aggressive driving. There are definitely good cab drivers out there, but the chance of having a bad experience is too great because of how the market is structured.
Uber helps to make the lives of both drivers and riders better by leveraging technology to eliminate inefficiencies. The driver doesn’t have to fret about the next fare while riders don’t have to worry about physically hailing a cab, not being picked up or being abandoned by the driver for another ride. The service features a two-tiered rating system in which drivers and riders can rate each other. The review system allows Uber to weed out bad drivers as well as misbehaving clients. If there is a complaint from a driver about a client, Uber looks at the client history to decide whether he or she should be banned from the service. In the case of a potential ban, a senior member of Uber’s operations team makes the decision. From Uber’s perspective, eliminating bad actors leads to a better experience for both drivers and riders.
UberBLACK will cost more than a conventional taxi. Currently in Charlotte, the company is charging a $4 base fare plus an additional $2.50 per mile and $.50 per idle minute. Charlotte has many high-salaried financial workers and Uber’s Charlotte launcher Paul Faguét says the company is “definitely betting on that demographic.” Uber has also noticed that Charlotte is a major airport hub and will target business travelers as well. The company has a cheaper option called UberX, which uses mid-tier cars such as the Prius, Camry, Altima and Accord. While UberBLACK will take some business away from taxis, UberX’s lower pricing positions it as more of a competitor.
Faguét declined to commit to a UberX rollout for the Charlotte market, saying Uber doesn’t to like to promise things and not deliver. The company embraces the lean startup way of doing things in which it rolls out an initial product and then sees how receptive people are. “95 percent of the cases we roll out UberBLACK at first – that is our core initial product,” says Faguét. “And then UberX comes later after we kind of learn the market a little bit and understand how things work in a regulatory aspect.” So if UberBLACK gains traction, it’s a safe bet that we will see a rollout of UberX as well.
Because of its disruptive business model, Uber has faced regulatory backlash – most notably in Los Angeles, New York City and Washington D.C. So will Uber face the same kind of problems here? Faguét says recent changes in the North Carolina regulatory structure allows Uber to operate legally. But looking at Uber’s history, cease and desist letters and lawsuits usually come in after the company launches and then it goes to court or gets ignored. This has been the pattern since the company’s inception. Uber views itself as a technology company, providing an intelligent dispatch service to partners such as limousine providers and licensed professional drivers. It believes that it shouldn’t be put under the same regulatory scrutiny as a taxicab company. Right now, it’s way too early to tell if the city or the taxi industry will take any action against Uber. Detailed Block has reached out to the city department that manages passenger vehicles for hire, but has not received a response yet.
But despite the regulatory hurdles, Uber is expanding rapidly. It’s been aggressive in its international expansion with recent launches in Johannesburg, Seoul and Shanghai. It recently received a massive $258M investment from Google Ventures and TPG, which allows them to hire much more staff and give it much more runway than its competitors. Uber has the potential to shake up the transportation market in Charlotte, especially if it rolls out UberX. When I pressed Faguét about Uber’s growth strategy in this market, he didn’t commit to any hard numbers, noting the company’s iterative approach and emphasis on validated learning. He did guarantee that there will be more than five cars available over the next couple days. Could Charlotte eventually be a 1M rider market for Uber? “I can’t say – we don’t even know ourselves,” Faguét says. “We’re just trying to commit whatever resources to grow as fast as possible currently. Our earliest markets – New York and San Francisco – are still growing.”