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Cab Industry On Verge Of Collapse? Capital One's Taxi NPL Rate Soars Above 50%

"Having abandoned its venture to lend out roughly $1 billion to legacy Taxi "Medallion" drivers and businesses some two years ago, and shifting its backing over to Uber resulting in many unhappy drivers as well as a handful of lawsuits, Capital One has nonetheless provided a useful spotlight into the troubled state of the traditional "yellow cab" industry by breaking out the details of its runoff commercial taxi medallion loan portfolio in its quarterly reports.

And according to the latest, just released report (in which COF incidentally missed both the top and the bottom line, reported EPS and revenue of $1.45 and $6.60 billion, both below expectations), the US taxicab industry must be on the verge of collapse, because in COF's Q4 report, the company reported that while the size of its runoff Medallion "held for investment" loans tumbled by $83 million from $773MM to $690MM, it was the surge in the nonperforming loan rate that was the stunner: surging from 38.8% in Q3 to a whopping 51.5% in Q4, it suggests that legacy cab drivers in the US are not only barely making money, but are in financial dire straits.

"Of course, the irony is that the Medallion industry's biggest nemesis, Uber, is likewise burning through billions in venture capital cash every year in hopes of putting its legacy competitor out of business. And, if these Capital One numbers are any indication, it may soon succeed.

[and see also; https://www.law360.com/articles/674979/capital-one-sued-for-quitting-taxi-venture-backing-uber]


http://www.zerohedge.com/news/2017-...pse-capital-ones-taxi-npl-rate-soars-above-50
 

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Cab Industry On Verge Of Collapse? Capital One's Taxi NPL Rate Soars Above 50%
http://www.businessinsider.com/more-proof-that-uber-is-killing-the-taxi-industry-2016-1
More proof that Uber is killing the taxi industry
Tim Stenovec, Tech Insider Jan. 7, 2016, 12:20 PM

Uber, and the bevy of other ride hailing services like it, may only be a few years old, but in many places they're having a disastrous effect on the local taxi industry.

The latest victim: Yellow Cab, the largest taxi company in San Francisco.

The San Francisco Examiner's Joe Fitzgerald Rodriguez reports that Yellow Cab will file for bankruptcy protection.

"We are in the midst of serious financial setbacks," Pamela Martinez, the president of the Yellow Cab Cooperative, Inc., wrote in a letter to shareholders obtained by Rodriguez. "Some are due to business challenges beyond our control and others are of our own making."

Rodriguez spoke to "longtime taxi industry sources," who told him that ride-hailing services like Uber and Lyft are among the sources of Yellow Cab's financial woes. The startups are attacking on all fronts - they offer less expensive and more convenient rides, and also attract Yellow Cab's drivers, Rodriguez writes.

San Francisco's taxi industry isn't the only one feeling the heat from the ride-haling startups.

Services like Uber and Lyft are causing the prices of New York City's medallions, which are required to operate yellow cabs, to plummet. There's a hard limit on medallions, so they've become a currency of their own in the NYC taxi business.

The price of a single medallion in 2013 in NYC was at $1.32 million, but as of last August they were being sold for as little as $650,000, according to Bloomberg.

Medallion prices in Boston and Chicago have also fallen, according to The New York Times.

Uber, meanwhile, which operates in 67 countries, recently raised an additional $2.1 billion for a $62.5 billion valuation.

The service has drawn the scorn of taxi drivers around the world, and has been the target of taxi-driver led protests in New York City, Paris, London, Toronto, Sao Paulo, Rome, Brussels, among other cities.

Lyft, which only operates in the US, recently raised $1 billion, including $500 million from General Motors, and has a valuation of $5.5 billion.

Numbers aside, there is clearly an ongoing transition in the world of taxis, and San Francisco's Yellow Taxi is just the latest bellwether of the massive changes yet to come.
 
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FLASH-BACK to April 2013:
A Reporter Looks At The Disruptive Effect of RideShare Apps on The Taxi Industry

The Tyranny of the Taxi Medallions
https://priceonomics.com/post/47636506327/the-tyranny-of-the-taxi-medallions
Published Apr 10, 2013


(also includes a basic intro to the 'medallion' system)

Taxi Medallions 101

The current structure of the American taxi industry began in New York City when " taxi medallions " were introduced in the 1930s . Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. (Many of them have different names for the licenses, but we'll refer to them all as medallions.)

But the taxi medallion requirement had an unintended consequence - it made taxis scarce. The "right" to drive a taxi become very valuable as demand outstripped supply. When this medallion system was introduced in New York City in 1937, there were 11,787 issued. That number remained constant until 2004. Today there are 13,150.

As demand for taxis has increased with supply relatively fixed, the cost of the medallion in New York City has skyrocketed to over a million dollars a year. Even after adjusting for inflation, taxi medallions prices are absurd :



In Boston , the price of a medallion is $625,000. In San Francisco, you need to drive a taxi at least 10 hours a week if you want to hold a medallion and lease it out. Veteran taxi drivers are able to sell their medallions for $300K and the city of San Francisco takes a $100K commission on the sale .

In the taxi market, there are three players: The medallion holders that have the ordained right from the government to operate a taxi, the taxi driver that pays the medallion holder to drive the taxi, and, sitting in between these two parties, the taxi dispatch company. A pure middleman, the dispatch company facilitates the transmission of funds between medallion holders and provides some infrastructure like scheduling, fleet maintenance, and occasional customer leads for the taxis.

There is some overlap between these three entities. Sometimes drivers own medallions, or taxi companies hold medallions. Still, it's useful to isolate these three main economic interests in the taxi industry. How each of them reacts to industry disruption is very different.
 

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San Francisco Yellow Cab filed BK because of a huge lawsuit they lost, not because of Uber/Lyft.
http://www.marketwatch.com/story/ub...ab-and-they-could-hit-same-pothole-2016-01-22
Uber and Lyft didn't bankrupt Yellow Cab, and they could hit same pothole
By Therese Poletti
Published: Jan 22, 2016 7:28 p.m. ET

It's easy to jump to the conclusion that the bankruptcy filing of Yellow Cab of San Francisco - located in the hometown of both Uber Technologies Inc. and Lyft Inc. - is due to the fierce competition from the heavily financed ride-hailing app companies. But the reality is a bit more nuanced.

Ultimately, the Chapter 11 bankruptcy filing of Yellow Cab of San Francisco on Friday is actually a warning to the disruptive newcomers that their independent contractor business model - already under attack in a class-action lawsuit - is not necessarily a shield from costly litigation or million-dollar lawsuits.

Last June, a San Francisco jury found a cab driver was an "ostensible employee" and that Yellow Cab was liable for an $8 million award to a passenger, Ida Fua, injured in a collision that left her paralyzed on one side, unable to work. According to a creditor's list filed along with Yellow Cab's voluntary petition for Chapter 11, its estimated liabilities were more than $10 million, and included several large judgments against it, but obviously Fua's seems to stand out in size.

[ read more ]
 

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The disruption of the medallion system is the only good thing to come out of all this "ridesharing" crap.
There's a lot of 'crap' (to use your words) that's come from the Rideshare phenom - but disruption of the medallion system is only one of the good things that's come from it. Consumers generally love using the TNCs (obviously) and a lot of drivers have been able to make use of the opportunity to help their cash-flow during times of unemployment and under-employment.

Yup - lot's of drivers also get burned...
but that doesn't mean the work hasn't helped a lot of people through some tough times
(while also digging others deeper into a hole).
 
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Not quite following the analogy . . . can you expand (please&TY)?
Santander was the financing company aligned with Uber to write sub-prime loans to drivers financing cars to drive Uber. It got in a lot of trouble for its lending practices. CapitalOne, now aligned with Uber, could step in and offer similar sub-prime loans...
Thus circle1 's comment:
Capital one is the new Santander
 
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More people sleep on the streets overnight waiting for the latest Apple-i-anything to go on sale than TNC drivers who sleep at the airport.
And they both have something in common: they do it by choice.
I know drivers who drive only weekends and like working the airport... and they'll happily catch three hours of sleep in the parking lot between the last flight in for the night and the first flight arriving in the morning. It's not like they are homeless and living on the street - or in their cars. They do go home - some to very, very nice suburban homes.
 

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The medallion selling business yeah, the cab business not so much. Most reports have it at 20% reduction in business, and it's mostly at airports.

Now 20% is nothing to sneeze at but it's not the end of the world. Cabs have minimum fares that cover costs they don't lose money on a trip & wouldn't take most uber rides they don't drive way out to run someone around the block or a couple miles. If they do they make enough to cover costs, profit, and tip.

Uber rides are subsidized .55-$1 or less a mile is a 1955-1985 cab rate, a $3.60 minimum uber fare is from 1979 they simply wouldn't ever accept those rides.
Agreed. The problem for cab companies (and cab drivers) is that more and more riders are choosing to pay the rideshare guy $5 instead of paying the cab driver $10 - which means that the TNCs business is being built not only on the business that the cab drivers don't want - but also on the traditional business they have previously been able to count on.
 
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