In another chapter of the ongoing regulatory evolution for ride-sharing services, California's Department of Motor Vehicles is to require commercial plates for UberX and Lyft drivers.
This is a big change for these services.
Prior to this ruling, drivers only needed to have a car and the branded app in order to pick-up passengers and participate in the sharing economy.
Now the drivers will be required to go through the following steps:
- Pay a higher fee for a commercial plate.
- Extensive paperwork to apply for the license.
- Attend a scheduled appointment with the Department of Motor Vehicles.
Drivers might also be required to have commercial liability insurance — a large increase in cost that would certainly change the economics of work for many drivers.
Companies such as Uber have previously reimbursed drivers for fines incurred when breaking certain regulations — such as picking up riders at the airport — and perhaps the companies will be induced to do the same in California.
The loss of supply could have a huge impact if demand stays steady, so the ride-sharing companies will have to do something to mitigate the potential impact of this regulation.
The exact verbiage from the government's memo, dated January 5, 2015, is:
Any passenger vehicle used or maintained for the transportation of persons for hire, compensation, or profit is a commercial vehicle. Even occasional use of a vehicle in this manner requires the vehicle to be registered commercially.
In regards as to the clarification for licensing, the memo states that it was released after "an increasing number of dealers and customers have inquired about the process."
Uber is pointing to a mix of conflicting regulations, saying in a statement that its drivers have the right to operate using personal vehicles:
The California Public Utilities Commission allows (ride-hailing) drivers to use personal vehicles with personal registration on the UberX platform.
An enforcement agency was not identified in the memo, so this might be a case of an unenforceable policy that conflict with other state organizations. The California Public Utilities Commission also recently ruled that carpooling within these apps was not legal.