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Canada / Analyst Insights
Opportunities and Challenges: Canadian Ride-Sharing Services

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by Eva Koronios, Industry Analyst
Dec 02 2019

In part three of our Opportunities & Challenges series, IBISWorld discusses the opportunities and challenges industries face in response to changes in regulation, technology, competition and more. In this article, we’ll discuss the Canadian industry response to ride-sharing programs like Uber and Lyft.


The road to success is bumpy for ride-sharing services in Canada. Despite being largely welcomed in the US, smartphone applications like Lyft and Uber have struggled to find acceptance within the Canadian market due to push back from traditional car service industries.

Offered as an alternative to conventional cab-hailing options, ride-sharing services are perceived as a quicker, less-expensive way for riders and drivers to connect, all from the convenience of their smartphones. This innovative and disruptive business model poses a competitive threat to traditional car service operators, dramatically altering Canada’s wider transportation sector.

Moving forward, both industries are expected to face a host of opportunities and challenges as the competition for the Canadian market continues.


The rise of the self-employer

Despite having similar service offerings, revenue for Canada’s Taxi & Limousine Services industry (IBISWorld report 48533CA) does not directly include funds generated by Uber and Lyft. Instead, drivers leveraging ride-sharing technology are considered as industry-relevant nonemployers. Consequently, the increased popularity of ride-sharing services over the past five years has spurred a wave of nonemployers to enter the industry, boosting the number of industry establishments by an anticipated annualized 8.3% to 41,485 over the five years to 2019.

As a result, self-employed individuals gain a viable channel of revenue generation that simultaneously helps finance their personal vehicles. In general, barriers to entry for prospective ride-share drivers are low, provided they pass background checks and have their own vehicles for transporting passengers. However, the latter isn’t required in some cases; for example, Lyft’s Express Drive program approves short-term rental cars for their aspiring drivers who may not have a vehicle of their own.

Consequently, the expanding pool of potential nonemployers is projected to continue to drive industry growth, with the number of establishments anticipated to rise an annualized 5.5% to 54,148 over the five years to 2024.


The benefits of being a rider

On the consumer side, price competition between services provides riders more options for what to pay. On the whole, ordering an Uber or Lyft can be significantly less expensive compared with more traditional alternatives, threatening established employers’ revenue gains.

The only requirement for operating ride-sharing applications is to have a network-connected smart-phone. Over the five years to 2024, consumer cell phone use in Canada is expended to continue to trend upward, with the number of mobile telephone subscriptions forecast to increase an annualized 3.5%.


Growing challenges for established drivers

At the local level, many governments are doing their part to quell the spread of ride-sharing apps and protect traditional car service operations in their area, with some provinces going as far as to ban ride-sharing application use completely. This has resulted in multiple high-profile regulatory battles and legal showdowns between Uber and Canada’s local governments over the past five years.

In additional efforts to accommodate the transportation sector’s rapid technological shift, governments are making necessary adjustments to local taxi licencing frameworks.

Nonetheless, the tide is slowly shifting. Most recently, British Columbia’s provincial government has promised to have Uber up and running by Christmas 2019.

Ottawa has taken an alternate route, choosing to permit Uber to operate in late 2016. In Alberta and Calgary’s provincial bylaws, the existence of ride-share vehicles is permitted. However, Uber temporarily cut its operations in Alberta in 2016 when the provincial government postponed making insurance and licence changes for Uber drivers. Within the past year, Quebec’s provincial government permitted Uber to operate a year-long trial period through October, in addition to allowing for the emergence of Eva Global Corp., a viable ride-share competitor, in Montreal, the province’s largest city.


Contrasts with the US
Despite taxi and limousine drivers in both the US and Canada have expressed similar concerns regarding the increasing dominance of ride-sharing apps, each country’s overall regulatory and societal values stand in stark contrast from each other.

While local governments in Canada have taken specific regulatory and/or legal action against ride-sharing companies, the same cannot be said for local and state governments in the US. 

Moving forward, the trajectory of Canada’s emerging ride-sharing industry is anticipated to take form as the various regulatory disputes surrounding companies’ domestic operations are gradually resolved. However, it is yet to be determined whether these highly anticipated verdicts will bolster or impede the service’s breakthrough into the Canadian market.


Looking for related coverage on the effects of ride-sharing services on the North American economy? Discover our previous Analyst Insight discussing the effects of ride-hailing on tax revenue here!


Edited by Sean Egan
Infographic Design by Alexandria Valenti