Imagine losing 80 percent of the value of your company in only four years. That’s what happened to owners of New York City taxi medallions.
Back in 2013, a New York City medallion fetched an eye-popping $1.3 million dollars. That’s an expensive hunk of metal, but necessary if you want to operate a taxi within city limits. With more than 8 million people perpetually in motion, taxi driving provided a fair living to those who transport the masses around the City that never sleeps.
Up until now.
This essential service isn’t going away, but it faces immense competition due to innovation and our evolving definition of convenience.
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Since ride-hailing services like Uber and Lyft began operating in New York, the price of a taxi medallion has plummeted.
Their decline coincides with dwindling yellow cab rides. In 2017, Uber dispatched more trips than yellow cabs. And Morgan Stanley reports that New York’s taxi operators had 35 consecutive months of year-over-year declines in revenue and trips per day.
That may be why you can now find a taxi medallion on sale on NYCityCab for about $300,000 or less. Yes, medallions have lost over $1 million of their value in the past four years.
The drop in value has had devastating consequences for operators, as many borrowed money to finance their medallions. Even New York City’s own taxi king, Evgeny “Gene” Friedman, saw a reversal of fortune as the worth of his medallions dropped dramatically.
At one time, Friedman owned over 800 medallions. With falling prices, however, he was forced to sell 46 of them to pay off creditors. More recently, a hedge fund bought all of Gene’s medallions at auction for $8.56 million, or $186,000 a piece. That means New York City medallions may still be overpriced in the current market.
Part of the problem is that taxis are closely regulated, while Uber plays with looser rules. Also an issue: the city controls the number of yellow taxi medallions, capping it for the last couple of years at 13,587. In contrast, nearly anybody can be an Uber driver. Over 51,000 vehicles are affiliated with the service in New York City – and they continue to add new drivers to their ranks every day.
First Uber. Now No One.
But ride-sharing services are just the first shoe to drop. Driverless technology, now slated for testing on New York City roads, could drive the worth of a taxi medallion into the ground.
Nvidia announced it is building the brains behind these robotaxis. And plenty of automakers and tech companies are invested in getting them on the road. Earlier this year, Cruise Automation, a subsidiary of GM, filed to test driverless cars in a 5-mile section of lower-Manhattan. Testing won’t start until early 2018, but that didn’t stop GM from announcing plans to deploy a large-scale fleet of robotaxis in large cities by 2019. That’s, by far, one of the most ambitious timelines to date.
Waymo is testing driverless taxis outside of Phoenix. In November, the company announced it’s moving the safety driver from the driver’s seat to the back seat. The employee can hit a pull-over button, at any time, if something goes wrong. But, eventually, rides will be offered without any Waymo employee watching…. at all.
While Waymo has big commercial plans for its driverless taxi fleet, the company hasn’t said when it plans to deploy these robotaxis.
When they do, though, municipalities will no doubt need to oversee them. If New York requires those operators to hold the traditional taxi license, the price of medallions could rebound.
That could be a strange irony: The emergence of ride-sharing apps tanked the fortunes of medallion holders. Could the next technology – robotaxis – restore their worth?
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