Apr 9, 2024 - News

What Minneapolis can learn from Uber and Lyft's year-long exit in Austin, Texas

Austin, Texas, in 2016. Photo: David Williams/Bloomberg via Getty Images

The last time Uber and Lyft pulled out of a big U.S. city — Austin, Texas, in 2016 — a half-dozen new rideshare apps popped up to fill the void.

Yes, but: A lot of passengers used the new options less often.

Why it matters: If Uber and Lyft make good on their threats to leave Minneapolis, the Twin Cities can learn from Austin's experience.

Catch up quick: In May 2016, the companies abruptly stopped serving the Texas capital after voters upheld the city's new background check requirements for drivers.

  • Within a month, new startups were offering rides. The most popular was RideAustin, a nonprofit founded with $7 million in local tech money, followed closely by Fasten and Fare.

What they said: University of Texas marketing professor Raji Sreenivasan recalled many passengers were "generally happy" with the new companies — and excited to effectively boycott Uber and Lyft.

The other side: Many passengers sat out Austin's rideshare revolt.

  • Six months after the shutdown, less than half of former Uber and Lyft users switched to one of the new rideshare apps, according to a survey by university researchers. Nearly as many started taking their own cars.
  • On average, even passengers who switched to new apps took half as many trips each month as they did on Uber and Lyft, the survey suggested.
Data: Texas Transportation Institute. Hampshire, Simek, et al., 2017. Note: Totals rounded. Respondents were asked about their last trip pre-suspension and these answers reflect how they would make the same trip post-suspension. Chart: Axios Visuals

Zoom in: In popular online forums, some Austin drivers welcomed the new apps, reporting an increase in earnings and excitement at being free from the Uber/Lyft duopoly. Other drivers noticed the drop in passenger demand.

Friction point: In March 2017, both RideAustin and Fasten crashed during the South by Southwest festival — the city's biggest event of the year.

  • The new ridesharing companies never fully worked out the kinks in their technology, said Austin-based ridesharing consultant Jeff Kirk.

RideAustin's founders were open about the challenges of replicating Uber and Lyft. They said they were able to pay drivers more while keeping expenses in check, but also noted in public updates that they had to improvise many solutions on a shoestring budget.

In the end, the Texas Legislature — after heavy lobbying from Uber and Lyft — overrode Austin's fingerprinting ordinance in May 2017. Uber and Lyft returned to the city shortly thereafter.

  • Almost immediately, RideAustin's ride volume fell sharply. It survived until COVID hit, but many of the startups eventually folded.

Between the lines: The two rideshare giants connect large pools of drivers looking for work with large pools of passengers.

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