San Francisco Taxis Are Coming Back Strong - Here’s What Happening

Taxis are having a comeback in San Francisco and this could spread to California and the rest of the country. Our guest today is Hansuk Kim, who's operating the largest taxi company in San Francisco. He's here to tell us what's happening on the ground. So in San Francisco, now the taxi cab drivers have access to all of Uber's worldwide demand in addition to the normal taxi business. It's changed everything. When you book a ride through Uber, you are just as likely picked up by a taxi now as you would someone in their personal car. That is going to happen in every major city in the United States. I'm Siamak Khorrami. Welcome to California Insider. Hansuk, it's great to have you on, welcome. So great to be here. We want to talk to you about the industry of ride share and transportation in California and San Francisco is really the hub of all these kinds of innovation. Now there is these autonomous vehicles like Waymos and other ones with Uber and Amazon and ride share as well. You're noticing that some major changes are happening in this space and taxis might be coming back to San Francisco. Can you tell us what's happening? So believe it or not, taxis and ride share have partnered. So what's happening right now is that ride share has decided to basically refer their rides to taxis to service their passengers. So my company Flywheel partnered with Uber where Uber is now referring their passengers over to taxis to be serviced. What's very unique about this partnership though is that those rides, when they come over to taxis, it is categorized as a taxi trip. But what we were able to do is get regulations changed to allow those Uber rides to come over priced as is and so that the user experience is exactly the same whether it's a taxi or a ride share picking them up. And that has now allowed taxis to have access to all of the business that they had lost over the years to ride share. And you might ask yourself, why would an Uber want to do this? And for several reasons. For Uber, they have now this supply of full-time taxi drivers to actually service their world-leading demand. And the financial model is a very good one for Uber where when Uber provides a ride to someone in their personal car, they have to insure that ride, there's liabilities, driver employification challenges. When that ride comes over to Flywheel and we provide that ride to a taxicab driver, that is a taxi ride. So the taxi's insurance covers it, the driver is not employed by Uber and they have limited liability. So in some ways, for Uber to prefer their passengers and to be completed by a taxi is actually very good financial sense for them. San Francisco is a place where a lot of trends start in California and the rest of the country. Is this a trend that you see happening in the rest of California as well? Without a doubt. I can say to you confidently that this is going to happen everywhere else in the country. San Francisco is known as a bellwether city. Things that happen here eventually happen elsewhere. No matter what you think of San Francisco, it's because of Silicon Valley and all the tech trends that are happening. But this partnership is so mutually beneficial for rideshare and taxis that in San Francisco, where we tested this out, this partnership, when you book a ride through Uber, you are just as likely picked up by a taxi now as you would someone in their personal car. That is going to happen in every major city in the United States. I will tell you in the next few years, most taxis are gonna be servicing Uber for trips in their city of operation. And one of the things with taxis is usually they have these older cars Is that changing? Absolutely. The day where taxis are a lot to be desired, regulations have now caught up. They're modernizing the fleets. And even my own fleet, we're using electric vehicles now, Teslas and so forth in my own taxi fleet. But what we've seen here is that the taxi industry that survived the competition of rideshare over the last 10 years, and then the pandemic, what we're seeing is those companies now are more ready to focus on service quality, technology, to be more competitive here. And now through this partnership with rideshare, they are going to blossom. I can say to you, the taxi industry, which everyone thought was long dead, is going to have a huge resurgence through this partnership where third-party companies like Uber are realizing taxi infrastructure and utilizing that to service their customers is actually a very good financial model. Are there any benefits for people that are getting these taxis? Yeah, so a lot of people don't realize that taxis have privileges over private vehicles. I'll use San Francisco as an example. San Francisco has what's called transit-only lanes. These are red lanes that are painted on the street that only buses and taxis are allowed on, right? No private vehicles. There's actually a main street in San Francisco called Market Street. That is closed off to all private vehicles. Only commercial vehicles like taxis are allowed. So taxis actually get around the city much faster than private vehicles. So the advantage of utilizing a taxi for an Uber is not just that their customers can take advantage of these privileges that only taxis have, but taxis also come fully insured, right? Taxis come with a licensed driver. All the vehicles, everything meets regulations. And so for Uber to be able to refer their ride over to a taxi allows them to basically avoid their own insurance costs when they give it to someone in a personal car, limit their liabilities, and take advantage of these other privileges. What's the difference between the taxi driver and what's the value they provide versus an Uber driver or a Lyft driver, like a ride-share driver? It's a great question. Overall, they're both vehicles for hire. So you're basically picking up the public for a fare, but taxis are highly regulated. And so when Uber and Lyft first started, they really decimated the taxi industry because they were able to kind of make anybody a taxicab driver through their technology. And taxis were very controlled where you had a limited number of vehicles that could be on the road. You might've heard about a taxi medallion or permit where some cities sell them, right? They were selling for like a million dollars because you had a limited ability to have a taxi. Well, when Uber and Lyft started, they were able to basically make anybody a taxicab driver, so to speak. And that kind of decimated the values of these medallions. A lot of people decided, instead of becoming a cab driver, why don't I just drive for ride-share with my own car? And so the industry really changed drastically with that. Let me just say a couple of interesting points about that. The reason ride-share started in San Francisco was because there were not enough taxis 10, 15 years ago. You could not get a taxi. There were a limited amount of taxis. And they were very expensive, probably. And they were also expensive. And here comes Uber and Lyft basically saying, hey, not only we're gonna pick you up, but you don't have to have cash on you. You can book through your phone. You'll see who's picking you up. You'll see the car coming to you. And whether we agree or disagree about how Uber and Lyft were able to kind of play almost by a different set of rules, they won the battle for demand. The public decided, hey, this is the way that I want to book a ride, right? So the taxi industry, and although I own a large taxi fleet in San Francisco, I am one of the biggest critics of the taxi industry. The taxi industry, even to this day, are still dinosaurs. They have not adopted the technologies that the public wants. And Uber and Lyft and rideshares took full advantage of that with this technology. And so only now have the taxi industry realized that smartphone booking, e-hailing, which we call it, is something that we have to have as standard service. But now partnering with rideshare, where those rides are now coming over to taxis, are now quickly modernizing the taxi industry in terms of having the same technologies that the public wants. For example, if you get into a taxi today, you still have old type of meter systems in these vehicles. You don't even know the price of the ride till the end of the trip. I call it meter anxiety, right? You don't even know what the price is. So the ability to have a flat upfront price to book on your phone, all those types of things are now quickly being adopted by the taxi industry that is left dealing with this competition with rideshare, and then of course the pandemic. But they're quickly now adopting, and this ability to access Uber's business is an economic one, and they are quickly realizing if we don't have access to this partnership or this demand, we're not gonna be around for much longer. Why is the rideshare space partnering up with taxis? Why do they need the taxis? One is for the rideshares, as I mentioned earlier, they have this now steady supply of full-time drivers, not part-time drivers. We have full-time drivers that can actually pick up lots of rides that are in a commercial vehicle, that are properly insured, properly trained. But really, if you think about it, when Uber provides or Lyft provides a ride to someone in their personal car, they have to insure that ride. They have to deal with all the liabilities of that accident, and they're still fighting their employification category. If you remember Prop 22 from a few years ago in California was a proposition that said, are these drivers independent contractors or employees, right? They won that, and they are independent contractors now, but that aspect is very difficult in terms of the cost structure. When rideshare hands that ride over to a taxi to be serviced that again, insurance of that taxi covers the ride, and there's limited liability for the rideshares, and they didn't hire that driver. So in some sense, if a rideshare can refer their customer over to a taxi to be completed at a high level of service or an equal quality of service, they can offload a lot of those costs in the sense that as you have more taxis completing these rides, you do not have to provide these other costs to someone in their personal car that they have. That's very attractive to them, along with the increased supply of these taxis. So what you're saying that right now, rideshare has a lot of liability, that if there is an accident or if there's a harassment situation because they have the driver, they're on the hook for the driver. When they go to the taxis, they're not on the hook anymore, right? Well, in that sense, yes. When Uber or Lyft provide a ride to someone in their personal car, they have to insure that ride. And some say that once they provided rides to people in their personal cars, they sort of became a transportation company away from a software company. Some people say that here. But they have all the liabilities that come along with that in terms of accidents, lawsuits and harassment or whatever that these companies have. When that ride comes over to us and we provide that ride to a taxi, that is now categorized as a taxi trip. So the taxi insurance covers it. It is a taxi ride. So those liabilities become limited as well as the insurance costs for Uber. And that is a great example of how it might be a better financial model. In this holiday season, if you're looking for a perfect gift, make sure to consider Shen Yun. I've been going to Shen Yun for many years. This is a show that's showing ancient China what it used to be before communism. And unfortunately, it's not allowed in China right now. And the performers are based out of New York. Even though it's showing ancient Chinese culture, it's actually the history of humanity, 5,000 years of culture. And whoever you invite to see Shen Yun will have an unforgettable experience. They're coming to California in a few weeks. Make sure to get your tickets. A performance that truly matters. Each and every one of us. This is what you've been waiting for. Shen Yun. Get tickets now at shenyun.com. Hansu, you're telling us that the ride share is going to hire taxis because the taxi drivers are well-vetted and they're professionals. And now the ride share industry is seeing that there is a lot of value in the taxi drivers. Now, at the same time, there is a big movement in this space completely trying to replace the drivers. Like there's Waymo's and other technologies with Amazon and Uber and Tesla. What do you think of that side of it, or autonomous vehicles? Overall, I'm very impressed with autonomous vehicles. I think the technology has really improved. However, there's some key things that are very hard to overcome. So I can honestly tell you, I'm not worried about all drivers being replaced anytime soon still, even today. However, there are key aspects where I think you will see, just like ride share partnering with taxis, you're going to see autonomous vehicle companies partnering with taxis too. For example, disability rides. Here's a situation where if you have someone in a wheelchair or someone who is blind, you don't have robots helping that person in and out of the vehicle. So if we partner with an autonomous vehicle company, which we're in discussion, we are likely going to have those disability rides referred over to us to be serviced by a taxi cab driver. And what taxis do very well are disability rides. A percentage of all taxis have to be wheelchair accessible by law. And there are subsidized government programs, a big one called paratransit, where people in wheelchairs, people who need to get dialysis have subsidized rides that are serviced by taxis. And with the aging population and demographic over the next few years, that is only going to increase. But the ability for taxis to actually help service these new technologies, as you can see, I see is still going to be happening for a long time. So a lot of people would like to say taxis are dead, but I will tell you is now resurgent. And by partnering with these companies, a lot of this business are going to go to taxi drivers. Very interesting. At the same time, the costs of these are a lot higher. People complain that the Waymo's, it's two to two and a half times more than Rideshare. I actually think the pricing is going to come down. And if you think about it, the bulk of the revenue for any ride, Rideshare or taxi goes to a driver. So you take the driver out of the equation, 100% of the fare is now going to be available for the technology company, for Waymo or for the taxi company or for the Rideshare company. So I think the margin will be very good. Even if a vehicle costs $200,000 or whatever the cost is, I think if there really is no driver, there's a lot more revenue that can be split. What I would like to say about this though, is that everyone is thinking that autonomous vehicle companies are going to supplant Rideshare and taxis, right? They're going to be the next level and they're going to be gone. It appears to me that these autonomous vehicle companies are in fact trying to partner with Rideshare and taxis footprint. In other words, they would like us to utilize their technology in our fleets and maybe work out some sort of licensing fee or shared revenue fee of some sort. So instead of actually seeing autonomous vehicles as a replacement to Rideshare and taxis, I think what you're going to see are partnerships and it's already happening with autonomous vehicles and Uber. We ourselves are about to partner with an autonomous vehicle company where we are going to start experimenting and utilizing their technologies as taxis. But in terms of pricing, to answer your question, it's likely going to come down over time. There was this incident in San Francisco. There was a cat that got hit by one of these Waymos and now there's discussion should we ban this technology and should we ban these cars? What are your thoughts on that? Well, you know, again, this goes right to the heart of key aspects of autonomous vehicles that are not yet overcome some of the technology challenges. I like to point out what's called the trolley dilemma. That is when a train, it's a thought experiment, an ethical question. If a train is going down the tracks, it's going to run over five people, but it can actually change tracks and only run over one person and someone has to make that decision. Well, autonomous vehicles can't make that decision. And when there is an incident that happens where humans jump in front of the road or the weather is bad, those things are really still challenges for autonomous vehicles. As much as their rides are now getting better and better, these key aspects, and this is a great example of running over a cat that everyone loved in the neighborhood, as well as the vehicle stopping in the middle of the road, blocking traffic and so forth. Those have happened in San Francisco multiple times. So we will see in terms of how much better that technology is, where there's no driver needed, but I don't still see that coming anytime soon where it's going to fully replace drivers en masse in the next few years. I still think it's far out. You have been in this space and you've seen how it completely changed. 10 years, 20 years ago, there was nothing like a ride share and people would have to buy these taxi licenses and there wasn't enough taxis in San Francisco. Everything changed. Can you tell us how this happened? Well, it's pretty clear. In San Francisco, in many places, you had limited number of taxis to service the public. So in San Francisco, where you could not pick up, there were long lines at the hotels, at the airport. There were just not enough taxis. Part of the reason for this, by the way, is that when you regulate the number of vehicles on the road, there are times where if you have an event, a Super Bowl or something like this, you're just never going to have enough commercial vehicles or enough taxis to service the demand. And other times when it's slow, there may be too many. So it was never a situation where you could adjust this. What's interesting about ride share is that it brings kind of elasticity, where when it's very busy, you'll have a lot more ride shares servicing the public. When it's less busy, they're not there. So in a strange way, ride share allowed the public to be better served by creating kind of an elasticity of supply. That's number one. Two, it is very clear. The public wants to be able to see who's picking them up, watch the car coming to them, be picked up in a timely manner, not carry cash. All those type of things that ride share was able to do that the taxi industry did not have. I think we've all been in a taxi where they didn't even want to take a credit card, right? So that's the legacy that we dealt with. When Uber and Lyft started in San Francisco to meet that demand, the taxi industry responded in a way where instead of adopting the technology that the public wanted, they basically fought against them. And it's understandable because they didn't want to compete with new folks, maybe playing with a different set of rules. What they should have done though is immediately adopt this technology. And that's what I did with my own taxi fleet in San Francisco. I bought the oldest cab company in San Francisco, started in 1928 and been continuously operating since then. It's called DeSoto Cab Company. What I did was rebrand the taxi company, Flywheel Taxi, to promote the Flywheel software application, which is just like Uber and Lyft, except you get a regulated taxi. And I did that to tell the public we have this technology too. It's not just rideshare, but taxis also have this sort of technology. And what happened was my main competitors that did not adopt that technology, one went bankrupt, one closed their doors, we tripled in size. And that shows you by adopting this technology and embracing it how different our outcome became. Now that we partner with Uber, where Uber is now referring their rides over to taxis and we get all that demand, this is creating that resurgence, I called it, in terms of having more and more people looking to drive a taxi. And I think there's a bright future for us because of that. Can you tell us how Uber and Lyft were able to actually make it to where they are today? It's such a great story. I will just tell you, when Lyft first started, they, believe it or not, they put a pink mustache on the hood of a car. A physical pink mustache. Like a big one? The big pink mustache was on the car. People might remember that. But they basically said that this was ride sharing. That's where the term comes from because at that time, they said, hey, you know, instead of having this expensive cost of owning a vehicle, what if you can give people rides with a voluntary payment that you can help offset the cost of your vehicle? That's what they're saying their app was. And so they started off this way. And I remember having a meeting with Lyft early on, the founders of Lyft, and I laughed at them. You think you can put a pink mustache on a car and act like a taxi? It's never going to happen. I couldn't have been more wrong. That's exactly what ultimately was allowed. And they were able to create a new category regulated by the state, the Public Utilities Commission, to legitimize their rideshare services. And the rest is history. And so once that happened, they expanded greatly. And they took a lot of the business away from taxis. And now the taxis are adjusting. And these now partnerships are happening. But way back then, the beginning of rideshare happened because there were not enough taxis. They utilized the technology the public wanted. And they ultimately legitimized their category with a new regulatory label. It's called TNC in California, Transportation Network Company. That's what Uber and Lyft are. And now they have grown tremendously. Was that the biggest thing to get through the regulatory? Because you mentioned taxis are regulated, highly regulated. Yeah. So initially, taxis fought tooth and nail, right? I joke around right now because rideshares and taxis were arch enemies. And we now have this evolution from arch enemies to friends. And we're now about to get married in that sense. So it's really changed drastically in the sense that these were arch enemies. But now through collaboration, there's only one set of the public we all serve, right? By collaborating, getting all this business in our mutual interest, that's exactly how it's playing out right now. So in a very interesting way, where it was kind of a death fight, it has now changed to one where both kind of categories are going to be growing by mutually cooperating. For those people that are in the rideshare, and a lot of people, when they get unemployed, they jump onto the, at least there's this opportunity to get on Uber or Lyft and do deliveries, to get some payment right away. For those people that are in this space, what do you recommend? Because what do you see? Well, through this collaboration, in our case, between Flywheel and Uber, we're actually seeing a lot of Uber drivers considering now getting a cab driver's license because they have the same access to those rides as an Uber driver as they now would have as a taxi driver. They get all the Uber business plus taxi business. So we're actually seeing more and more of these Uber drivers looking to get commercial taxi cab driver's licenses. But what's interesting is that, you know, 20 years ago, you're in law school or in between jobs, you might've got a cab driver's license, work part-time or something like this. Today, everyone drives for Uber and Lyft, right, for that part-time gig work and so forth. But now we're seeing that more people are realizing if I want to do this for a living, it might be better off getting a commercial taxi cab driver's license with collaboration. And that's what we've seen in San Francisco. We have so many former Uber drivers now driving a taxi here. And for Uber, it's in their interest as well, because if they're giving the rides over to taxis, those taxis are servicing those rides. Uber is still making their fees and so forth. So what we're seeing where taxis and Uber drivers were, or rideshare drivers were two different categories, it's now one where it's very hard to see a difference. You're in the taxi space, and how's the tourism there? Do you see anything, any challenges or anything that's going on in the city? In one word, bad. So unfortunately, San Francisco really was at a low point maybe about a year ago in terms of tourism. Everyone has read about it, kind of open drug dens, crime, all this type of things. We covered some of it on the show, the situation. In a really good way, because I think people need to realize that, well, I don't want to be too political about it, but the fact is that there was a lack, I think, of political leadership there in terms of allowing this to get worse and worse. A lot of businesses left, tourism went down drastically, and we're still facing that. Now we have a new mayor in San Francisco now, and already we see the changes. Already, I can see things improving. And from a service standpoint, that's a good thing. The low point is past, and now things are going to be improving again. And I'm very confident, just as I talked about taxis, that the city will become resurgent again. Han-Soo Kim, Chairman of Flywheel Technologies, it was great to have you on California Insider. Oh, it was a pleasure being here. Look forward to the next interview. What do you think of the situation in San Francisco with taxis? Do you think more people are going to take taxis over other options? Let us know your thoughts. You can always email us at siamak.californiasider.com or comment. We read all of your emails and comments. I'm Siamak Khorrami. This is California Insider. We'll see you next time.