Why Uber is gaining ground in New York, Tokyo

By Keiichiro Otsuka, Kyodo

Posted at Nov 03 2014 10:52 AM | Updated as of Nov 04 2014 05:45 PM

NEW YORK -- The smartphone-based Uber car hire service, originating on the U.S. West Coast, has spread to a number of other cities in North America such as New York as well as other parts of the world including Tokyo.

Its success in reaching more than 210 cities, achieved in roughly four years since its launch, is a gauge of the support it has gained from consumers in these markets and has led to fierce competition with taxis as well as new entrants offering similar services.

In New York, home to thousands of Yellow Cab taxis, users of Uber's dedicated application can order a nearby car to come to a designated location using a GPS-enabled smartphone. The app provides the name of the driver and the expected arrival time.

Fares are paid by credit card. The user and the driver rate each other on a scale of five. Poor customer ratings could lead to poor business for a driver. Feedback on riders measures their reliability as a customer and how they behaved during the ride.

Uber launched full-scale in Japan in March with a car hire service named UberBlack. Its fleet includes the BMW 7 series sedans of Germany's BMW AG and the LS sedans of Toyota Motor Corp.'s Lexus luxury brand.

Fares tend to be slightly higher than regular taxis in Japan but customers appear to see value.

"I feel safe as a customer and there's also that extra touch of being picked up by a black luxury car," said a female worker at a major Japanese manufacturing company who hired the service.

Since Aug. 5, designated "taxi day" in Tokyo, Uber has also been offering a taxi hailing service dubbed uberTAXI that allows users to hail a regular taxi and settle the fare via the app. The service, which began earlier in the United States, also helps taxi drivers increase riders.

Competition is expected to heat up with other app-based car pickup services already operating in Japan such as Nihon Kotsu Co., a taxi and hire company, and Tokyo Musen, comprising scores of taxi fleet companies.

In New York, the rating system addresses rider complaints about drivers' behavior such as refusal to pick up a customer for a short-distance trip. Since it started full-scale operation in 2010, its ridership has been growing rapidly in the city.

One driver who started working for Uber this year also expressed satisfaction, giving credit to the service for securing a stable source of business from passengers and hence income.

Uber has been drawing keen interest from investors. Current stakeholders in the company include Internet giant Google and investment bank Goldman Sachs. The company's valuation was estimated at $18.2 billion in June.

In the United States, Uber is facing competition from Lyft, also originating in San Francisco. The Wall Street Journal said the "fiercest battle" in the U.S. information technology industry may well be between these upstarts. "Forget Apple vs Google," the paper said in August.

Conspicuous by their "pink mustaches" attached to their fronts, Lyft cars basically offer ride shares with other passengers, which help keep ride charges low.

Rivalry is intensifying not just in winning customers but also in securing drivers. In May, Uber sent to its drivers an offer of $500 for referring a Lyft driver and $1,000 for signing up a Lyft contractor tasked to train new drivers.

As competition gets intense in the car hailing service market, British startup Hailo Network Ltd. said Oct. 14 it would pull out of North America including New York.

Meanwhile, Uber is facing a challenge from existing taxi operators who have lodged protests and lawsuits over loss of business. In Frankfurt, a German court temporarily banned Uber's rideshare and threatened to levy a penalty if the ban is violated. But the court lifted the ban in September.

Acknowledging the challenges his company faces, Uber CEO Travis Karanick said, "We're getting bigger, and we have to find that new balance."