NYC hires McKinsey to assess Uber impact on traffic

02 October 2015 Consultancy.uk

To explore the effects that for hire car services, such as Uber, have on the congestion in New York, New York City Hall has hired McKinsey & Company for $2 million to run a four month congestion study. Uber has however, publically questioned whether the length of time the study will take is sufficient for a comprehensive result, and therewith, McKinsey’s independence.

Uber is the world’s fastest growing start-up. The company, founded in 2009, is today worth $51 billion and has rapidly expanded its operations across sixty countries and 330 cities.

Many countries and regions have expressed concern about the way the firm operates. Uber has come to compete with traditional taxi-services, often undercutting the local taxi market by paying drivers relatively low wages while providing drivers with only limited or no social protections. The company also manages to avoid a wide range of taxes through its employment model, a bane to city and national coffers. Besides social and economic issues created by the model, the model may also be causing increases in traffic congestion, and therewith, economic damage and pollution.

McKinsey & Company - New York

New York congestion
Congestion in New York has become more and more of an issue in the city. Over the past four years, the average traffic speed in the city dropped 9%, with an economic cost of $16 billion each year and increases in air pollution from idling cars. Problems with public transport are partly to blame, however, the addition of a whole new system of regulating transport – Uber and similar services – may be adding a considerable number of additional traffic trips. Yellow cab trips dropped 10% since last year, it is however unclear whether Uber services took only that share or added additional trips.

In New York, Uber is being met with considerable resistance. Its bid to improve on what the city’s classic yellow taxi cabs offer, was vehemently striven against by New York City Hall in what became a bruising battle for Mayor Bill de Blasio. Although in the long term the battle led to a truce, de Blasio has sought to limit the company’s expansion in the city by restricting the number of Uber licenses issued in New York, with as central argument an increase in congestion in the city.

To investigate the congestion issue, the city hired McKinsey & Company to run an independent traffic study using the city’s traffic data as well as the trip information collected by Uber through its service as well as focus groups and surveys. “We hope that our agreement with Uber will continue in a productive fashion to ensure the city obtains the data it needs to complete a robust study,” says Blasio spokeswoman Karen Hinton. The study will cost $2 million and take four months to complete.

Uber taxi New York

Uber is not happy about the length of time the study is set to take however, and suggests that the study needs to be sufficient comprehensive to avoid possible political influences. “We want to make sure that it be comprehensive, that it be with best practices and that it be not political,” comments Josh Mohrer, General Manager of Uber in New York City.

McKinsey’s independence
Implicitly Uber is questioning whether McKinsey & Company is sufficiently independent to run the study. Since McKinsey agreed to the four month time period, it seems likely that they believe that it will provide sufficient time for a sufficiently comprehensive study to be performed. Uber is not certain, and has therefore hired firm Steer Davies Gleave to conduct a study about what a study should examine. “A study needs to consider the full range of factors that influence congestion in order to identify their impact,” Nicole Benincasa, a policy adviser for Uber, says. “A study that limits itself to only one or a few factors will likely miss other factors that cause congestion.”

Hinton responds however that: “The consultants are not starting from scratch, but drawing on an extensive body of existing data and research, augmented by new surveys, focus groups and other information. We are working with globally recognised consultants, including McKinsey and HDR.”

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