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Uber’s (NYSE:UBER) Freewheeling Era Is Over As Cities Tighten Regulations On Ride-Hailing

Uber Technologies (NYSE:UBER) is facing regulatory scrutiny across the globe, and it now seems the freewheeling era is over for the taxi-hailing company. The company saw its stock drop by 6% to $29.60.

Uber faces a regulatory crackdown

Last month it was a month to forget for the ride-hailing company after it was hit with regulatory hurdles from all fronts.  In the US, the state of New Jersey fined the company $640 million for classifying its drivers as independent contracts. Settle also passed new fees on rides as well as a to-be-set minimum wage for Uber drivers. Equally, Chicago approved the congestion tax on taxi-hailing services, which means it will and around $3 on private rides, especially during peak hours. In the UK, London declined to renew the company’s license.

It appears like the taxi-hailing companies’ freewheeling growth is coming to an end as regulators tighten regulation. At first, Uber had its way against its cities after it compelled them to pass rules that fitted its service. This was before cities could discover what was going on. Uber’s major markets include Los Angeles, New York, San Francisco, and California, as well as London. All these cities are now proposing rules and taxes that will, in one way or another, turn ride-hailing expensive.

Growing regulations could make rides expensive

This shift could have a tremendous effect on ride-hailing companies such as Uber. The taxi-hailing business relies on regulatory arbitrage. Instead of hiring their drivers as employees, they hire them as independent contractors and circumvent regulations put on conventional taxi companies. In other countries, it manages to evade taxes on goods and services.

These are the things that have made the company’s low ride prices possible. Since low prices are the company’s selling point, tightening regulation could thus make rides expensive.

Uber is not the only taxi-hailing company that is grappling with these regulations. Last month Juno folded its business and blamed New York City’s wage floor instituted in February. Early this year Juno and Lyft (NASDAQ: LYFT) sued New York over the driver pay rules.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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