Barcelona Cab Licenses Yielding 500% Boost Uber in Spain (1)

(Bloomberg) -- Spain’s best-performing investment over the last 30 years may be the black-and-yellow cab you hailed the last time you were in Barcelona.

The secondary-market value of a license to operate a taxi in the Catalan capital rose 503 percent from 1987 to 2016, according to a report this month by Spain’s markets and competition regulator CNMC. The benchmark IBEX 35 stock index gained about 325 percent over the same period.

Restrictions on the award of new taxi licenses in Barcelona means a Catalan cabby may be sitting on -- or in -- an asset now worth more than 134,000 euros ($150,000), according to CNMC. The surge in the value of Catalan cab permits hammers home the challenge facing governments in Spain and elsewhere as they seek to strike a balance between ensuring consumers have access to competitively priced services and demands for protection from workers in established regulated industries such as the taxi and hotel trades.

“Taxi licenses have a price that has been increasing and de facto has turned into a way to pay for a taxi driver’s retirement -- that’s undeniable,” said Sandra Sieber, a professor of information systems at Barcelona-based IESE Business School.

Customers Pay

For the customer, that often means a less-than-optimal service, according to the regulator -- which is just what firms like Uber Technologies Inc. and Cabify want to hear.

Rules limiting vehicle numbers, prices and the activities of such ride-hailing services mean that the more than 10,500 taxi license holders in the Barcelona metropolitan area operate in a near-monopoly environment that cost consumers at least 61 million euros last year, the regulator says.

“The cost of the taxi license in the secondary market is the most clear evidence of how the regulatory monopoly income generated by restrictive rules that limit entry and restrict competition in prices, quality and innovation transfers income from society to the established operators in the taxi market,” CNMC said in its report.

Prices for new cab licenses in other Spanish cities provide a sense of the mismatch between the primary and secondary markets, the report said. The Andalusian city of Cordoba issued some new permits in 2012 for 457 euros while second-hand licenses were changing hands in the city at the time for more than 102,000 euros.

Uber Restricted

Spanish regulation makes a distinction between taxis and so-called VTCs or vehicles for hire with a driver, a category that includes Uber and local rival Cabify, whose drivers can only pick up passengers who have ordered the service in advance.

Regional authorities can turn down VTC applications if the number of cars in the category exceeds one per every 30 official taxis. As of January, there were 803 VTC drivers in Catalonia compared with more than 13,400 taxis operating in the region. At the same time, Barcelona hasn’t given out any new cab licenses since at least 1980, according to CNMC.

Catalan taxi services are competitive because drivers face costs for taxes, insurance and making sure they’re compliant with regulations, said a spokesman for the region’s taxi drivers’ association. The region hasn’t granted any more licenses because it wasn’t necessary to do so, he said.

For its part, Uber called on Spanish authorities to open up the market.

“We encourage the government to lead a fair transition process towards modern transport regulations that benefit Spanish citizens and cities," a spokesman for Uber in Spain said by email.

Torched Cars

San Francisco-based Uber has fought with regulators around the globe over services that traditional taxi companies say threaten their existence. In many parts of the world the soaring value of taxi licenses is one reason why cab drivers are fighting hard to resist the emergence of companies such as Uber and Cabify.

Spanish “taxistas” staged a national strike last month in protest at competitors whom they say mimic their service for a fraction of the cost of a license. In a more sinister turn, nine Cabify drivers had their cars torched last month in Seville for seeking passengers at the city’s spring festival.

Still, for all the turmoil in the industry, throwing it open without carefully weighing the consequences is not the way forward, according to IESE’s Sieber.

“Deregulating the sector doesn’t solve the problem,” she said. “What we have to think about is how we’re going to re-regulate it. We have to evaluate what aspects of the market still deserve regulation and what aspects don’t.”

(Updates with details of new license costs in eighth paragraph.)

--With assistance from Thomas Gualtieri

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net, Maria Tadeo in Madrid at mtadeo@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Vidya Root, James Kraus

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