New York City was supposed to be a great market for ride hailing companies Uber and Lyft, but is now much less attractive after recent regulations went into effect that essentially capped the number of drivers and required a minimum driver wage of at least $15 an hour after expenses.
Lyft on Wednesday lost a lawsuit it filed that argued the wage law is unfair because after it has been in effect for one year, Uber will able to cut its expenses in ways Lyft won’t, because the wages are calculated based on the percentage of time that a vehicle is used to transport passengers, or utilization rate. Lyft said that due to Uber’s greater market share, it would have a higher “utilization rate” than its rivals. (This is why in some cities driving for Uber is more attractive to drivers than driving for Lyft.)On the other hand, according to the Daily News, the recent NYC rules capping the number of ride-hailing drivers appears to have benefited Lyft in terms of market share versus Uber. Uber, in its updated IPO prospectus for investors, said the NYC regulations had a negative impact on its financial performance in the first quarter of the year. It said other cities may enact such wage laws, further crimping its potential margins. Part of the bear case on Lyft and Uber stocks is that cities around the world will impose more such restrictions on these types of companies over time.