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Uber suspended in France

July 6, 2015 - tech
Uber suspended in France

Uber decided to suspend UberPop (equivalent of UberX) activities in France tonight to ensure safety of drivers and re-open negotiations with government. Two of its executives were indicted and will go on trial on Sep 30. Some coverage in English here and in more detail in French here.

The government argument is that Uber service falls into the VTC category (voitures de transport avec chauffeur), or chauffeur service and should be regulated. UberPop has more than 10,000 drivers subscribed and 4,000 active last week during protests. The regulatory impact is material – according to Le Monde, since January 1st only 215 VTC licenses were issued in France, whereas 25,000 drivers signed up for Uber at the same time. It takes six months and 250 hours of instruction to be qualified to become a VTC, which costs around 6,000 euros, plus the government requires additional 1500 euros in savings. The high transaction cost creates a clear supply and demand imbalance given how many VTC licenses are issued and how many VTD drivers sign up for Uber (215 vs. 25,000).

DATA POINTS
Uber passengers in France = more than 400,000

VTC license requirements
   Six months
   250 hours of instruction
   6,000 cost per driver
   1,500 required in personal assets

Since Jan 1
   VTC licenses issued by France government = 215
   Drivers signed up for Uber = 25,000

London vs. Paris
   VTC: 80,000 (London) vs. 10,000 (Paris) 
   Taxis: 30,000 vs. 17,700

Another interesting data point would be Uber’s market share in France. There are other urban transportation startups such as LeCab, Chauffeur-privé, SnapCar, Allocab and Drive, and they are threatened by Uber’s aggressive competitive positioning, according to Techcrunch. While Uber is dominant in the US with 20.35% market share (The Information) it is not dominant in other parts of the world such as India with 3.51%. In São Paulo cost-conscious passengers are quick to switch to Uber’s competitors on surge pricing. Given the local nature of urban transportation Uber enjoys indirect network effects only at the metropolitan level (between drivers and passengers), not at the country and probably not even at the state level. Therefore, its competitive advantage must focus on aggressive pricing at the local level.

The interesting question is the broader impact of the sharing economy and technology innovation in a country that is highly protective of workers rights and benefits. According to WSJ, Airbnb also had challenges in Paris but was able to achieve an agreement by offering to pay tourism taxes and suggesting new laws to accommodate its activities as a way to strengthen local economies. Can Uber do the same?

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