BUSINESS
09/08/2014 02:33 EDT | Updated 09/08/2014 02:59 EDT

UberX Service Launches In Toronto, Promises To Undercut Cabs

The Washington Post via Getty Images
WASHINGTON, DC - APR 4: UberX driver, Regan Rucker, drives a customer home, April 4, 2014, in Washington, DC. (Note -- That is not the real phone number of customer Tilman, Uber uses a security system that uses dummy phone number so neither drivers nor passengers have each others real phone numbers.) Rucker, a single mom who recently started driving for UberX, likes the flexibility of UberX because she can work whenever and however long she wants. Thousands of local car owners have signed up in recent months to drive with one of the 'ride-share' operators that use smartphone apps to link people needing rides with car owners willing to give them, for a price. (Photo by Evelyn Hockstein/For The Washington Post via Getty Images)

Taxi and ride-share company Uber launched its low-cost car service in Toronto on Monday, even as the company battles the city over the legality of its services.

UberX started taking orders at 2 p.m. ET on Monday, promising to undercut taxi fares by up to 40 per cent, the Financial Post reported.

Users call up a car on their Uber app and a driver — licenced by Uber but not a licenced city cabbie — takes them to their destination.

A ride from the financial district to the Yonge-Eglinton area will cost $12 with UberX, compared to $19 in a taxi, the company said, as quoted by Mississauga News.

Uber and similar services threaten to upend the traditional taxi model. Uber has been the target of protests in Paris and other European cities, where taxi drivers fear the new service will cost them their livelihoods. The company has also been criticized for its "surge pricing" policy, which sees fares rise suddenly and dramatically when demand jumps, such as during a storm or other emergency. Uber says the policy is designed to entice drivers to go where they are needed in emergencies.

Uber says drivers can earn far more working for their service than for a cab company. The company asserts UberX drivers in New York City earn a median income of $91,000, compared to the $30,000 average wage for a cabbie in the U.S. (Taxi driver wages are similar in Canada.)

Drivers for Uber pay 20 per cent of the fare to the company, and pocket the rest.

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The company has run into legal problems in many jurisdictions. A German court earlier this month banned the service from the entire country, on the grounds that it is a safety risk and exists outside regulations. That ruling is being appealed.

In Toronto, it’s already fighting the city after officials slapped it with 35 licensing violations over its ride-sharing app, which has been operational in Toronto since 2012. The city says Uber is running an unlicensed taxi and limousine service; the company says it’s an online service and municipal licensing regulations don’t apply.

As Metro News reports, city bylaws prevent drivers from charging a lower fare than the metered one, which is fixed for all taxis. A city of Toronto spokesperson told the news service the city is looking into the legality of the newly-launched UberX service.

Uber Toronto general manager Ian Black said ride-sharing is legal in Toronto.

“There is no regulation that currently applies to ride-sharing,” he told Metro News. “I think the City of Toronto will embrace UberX.”