The arrival of Lyft in Mexico could break the dynamics of a market that expects an aggregate growth of 28% between 2021 and 2025 and in which only five companies participate: Uber, Didi, Cabify, Beat, and BlaBlaCar.
Lyft, the US ride-on-demand app, can help lower the prices of these services in Mexico City. The platform, which is practically the only competitor of Uber in the United States, published more than 20 job offers on LinkedIn, mostly for software developers in Mexico City and Guadalajara, with which it could become the sixth player of a market that in Mexico is highly concentrated.
Lyft‘s arrival in Mexico could break the dynamics of a market that expects aggregate growth of 28% between 2021 and 2025, according to Mordor Intelligence, and in which only five companies participate: Uber, Didi, Cabify, Beat, and BlaBlaCar. In the same way, Lyft could also keep prices high and consolidate market concentration, so for Jesús Carrillo, director of Sustainable Economy of the Mexican Institute for Competitiveness (Imco), this should be analyzed by the Federal Competition Commission.
In December 2021, users of transport platforms complained about the increase in application rates in Mexico City. This caused Claudia Sheinbaum, head of government of the capital, to order her Secretary of Mobility, Andrés Lajous, to review the regulation of these services. In response, Didi representatives told El Economista that travel fares were a matter between drivers and passengers and that their increase was due to increased demand during the holiday season.
For Carrillo, sometimes the increase in prices is a sign of scarcity or excess demand, which usually occurs in a season like December. Transport during the Christmas season is inelastic, meaning that people have the need to move more intensely during the last days of the year. “This is very normal to be reflected in an increase in prices,” he said.
The concentration of the transportation platform market, which in Mexico has only five participants, adds a layer of complexity to the problem of rising transportation prices. According to the economist, with an uncompetitive market structure, such as that of Mexico, the companies with greater market power ─ Didi and Uber ─ can raise prices beyond the increase in demand.
“We don’t know it at first glance, but given that it is a fairly concentrated market, it is natural to think so, but there is no evidence,” said Carrillo, who believes that, for this reason, the competition authority in Mexico, Cofece, should analyze these cases to see if there are conditions of competition in this market.
Another of the responses of the government of Claudia Sheinbaum to the claims for the rise in prices in these applications was the promotion of the My Taxi application, with which taxi drivers can have an application similar to those of Uber, Didi or any of the other transportation applications and that, for Jesús Carrillo, it is a good measure as long as the application is of quality and is maintained.
The arrival of Lyft, which is looking for cities with high demand such as Mexico City and Guadalajara, could change the dynamics of the market in these locations, according to Carrillo. The fact that the company is listed on the Stock Exchange, that is to say, that it is capitalized, and that it operates in the United States and Canada, means that Lyft can compete and take away a part of the market from the largest companies, the case of Uber and Didi.
“If it enters with enough force, it could be that it pushes prices down,” said Carrillo, although he clarified that the platform could also keep prices high when its competitors increase them. This means that, although the entry of a competitor is necessary for prices to decrease is not enough, it is necessary for Cofece to analyze this market to verify that it has competitive conditions.
Founded in 2012, Lyft is a ride hailing platform. It operates in the United States and Canada and began trading in 2019 on the Nasdaq, where it reaches a capitalization value of more than 14,000 million dollars.