The ugly market-share battle in reimbursed ground transportation.
Rideshare companies are shaking up the rental-car industry and the taxi industry in the US. In at least one segment that we can track – company-reimbursed ground transportation – the rental-car and taxi industries, both, are getting crushed.
Facing these rideshare startups are, after decades of consolidation, three rental-car companies that now control 95% of the $28.6-billion-a year US rental car market, each with a number of national brands.
- Hertz Global Holdings (HTZ) which owns Hertz, Thrifty, and Dollar Rent A Car
- Avis Budget Group (CAR) which owns Avis, Budget, Payless Car Rental, and Zipcar
- Enterprise Holdings (privately held) which owns Enterprise, National Car Rental, Alamo, and Enterprise CarShare.
The total rental-car fleet in the US (all operators, including independents) dropped 5% year-over-year to 2.19 million vehicles in 2017, as right-sizing fleets has become a big theme. According to estimates of Auto Rental News, total revenues in 2017 were essentially flat with 2016.
While there are segments within the rental-car business that are doing well, there is one segment where rideshare companies are eating their lunch: reimbursed ground transportation.
And Rideshare companies are totally wiping out the market share of taxis within the reimbursed ground transportation segment.
These trends show up in the data from Certify, a provider of online travel and expense management for companies, based on its analysis of over 10 million business travel receipts and expenses.
Of the three ground transportation segments for business expense reimbursement – rideshare, rental cars, and taxis – the share of Uber and Lyft combined reached 72.5% share in the second quarter, according to Certify. That’s up from 0% not too long ago!
In Q1 2014, when Certify started tracking rideshare reimbursements, their combined share was 8% (almost all Uber).
At the same time, rental-car share of reimbursed ground transportation plunged from 55% in Q1 2014 to just 22% in Q2 2018. And the share of taxis plunged from 37% to just 5%:
Rideshare companies have a huge competitive advantage: They’re losing enormous amounts of money, and their investors like it that way and reward them – or rather themselves – with lavish valuations. In fact, investors are eager for feed them more billions to burn through, and thus they eagerly subsidize each ride.
Rideshare companies also have the advantage in many jurisdictions of not being regulated as taxi enterprises, and thus are able to dodge some expenses and rules.
But most importantly, rideshare companies are offering a service that riders appreciate and value. This came about as the staid taxi industry slept through the arrival of smartphones – and what an app-based system could do. While there are now apps for taxi services, it’s too little too late.
In terms of competing with rental cars in the reimbursed ground transportation segment: it’s logical. When you get off a plane in a city you don’t know, nothing beats skipping the rental car counter and getting picked up by chauffeurs that are at your beck and call, day and night, for the entire five days of your stay. And the company willingly pays for it all. This is a no-brainer for many business travelers – see above chart.
But within the rideshare universe of reimbursed ground transportation, it’s a raging battle for market share between Uber and Lyft. Uber was first and had the small pieces it was carving out from rental cars and taxis all to itself initially. Then Lyft came along and gradually started eating into Uber’s market share. But both were taking share away from taxis and rental cars at an astounding pace, and Uber’s loss of market share to Lyft was no big deal.
Then in late 2016, Uber’s self-inflicted series of fiascos caused a sudden shift in ridership to Lyft, with Lyft bumping up its market share from 7.7% in Q4 2016 to 21.1% in Q2 2018. Over the same period, Uber’s share dropped from 92.3% to 78.9%:
While Uber is losing share to Lyft within the rideshare segment, business travelers are spending more money per trip with Uber than with Lyft, according to Certify. In Q2 2018, on average per ride:
- Uber: $26.00
- Lyft: $22.37.
In many industries, new entrants with a slicker product or service can gain a good portion of the market, until the incumbents get the hang of it and fight back successfully, thus halting their own market-share losses. This does not appear to be the case in the reimbursed ground transportation segment where Uber and Lyft are continuing to crush the rental-car and taxi industries which have not yet mounted any kind of visible pushback.
GM, Fiat Chrysler, and Ford all got ugly in unison, in one day, something we haven’t seen since the Financial Crisis. Read… Carmageddon in Detroit
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Wolf,
What do you think the chance is that Uber or Lyft combine with or start a rental car company? Or, pick up Zipcar or one of its competitors?
Let me answer that question for you: the probability is 0.0%
Why on earth would ride share companies make the massive capital investment necessary to enter the rental car business, when they are about to wipe out that industry using a business model that pushes all the capital investment risk onto its drivers, while paying those drivers as if they were chattel?
Think it through. The goal here is to wipe out taxis and rental cars, then when the competition is gone, triple the price the customer pays, while maintaining zero exposure to capital investment risk, and paying its drivers just barely enough to survive.
This is Clown World Economics in action: use massive amounts of capital to destroy existing industries and replace them with a monopoly business you control, allowing you to charge monopoly rents nationwide, with zero accountability to anyone. This is economic predation at its absolute worst.
+1. Current consumers don’t care though.
When you use a rental car you still have to drive yourself, so there is a difference, cabs out west are considered an anomaly. Maybe ten years ago you needed to get to the MD 100 miles away, you might ask a friend or relative, now someone owns an Uber car, or a shuttle picks you up. So people get paid for doing something they didn’t use to get paid for doing, and that implies a more accurate measure of economic activity. There is a sea change of service functions that should lift the old measures, there is a lot more activity than most economists think.
The downside of clown world economics is that the businesses destroy jobs, or they reduce the payscales, and this leads to concentration of wealth and less demand in the economy as a whole. Companies are eating their seed corn to make a short term profit. We are at the point where innovation is a detriment, because the displaced workers can’t find equivalent work elsewhere. The electronic revolution will go down in history as a huge destructive force in terms of its societal impact. When people are promoting a “basic income” for doing nothing, you know we’ve innovated too much.
A German guy named Karl predicted exactly this around 150 years ago.
But instead of logic and rigorous analysis of actual human behaviors, our society is based on a fairy tale about a magic invisible hand.
two beers – And, the idea of basic income is based on the idea of the productivity of society ultimately belonging to the people of that society.
Somehow, the idea of the people of Alaska getting their part of the oil profits of Alaska is OK. Somehow if your family owning a large factory or something and your getting money based on being a member of that family is OK. Somehow, if you own stock, getting money simply for owning that stock is OK.
Just extend that. The idea is that robots are going to put us all out of work or something, or at least that the masses of people who do the work, and the profit of which just goes to buy Betsy de Voss another yacht or something, should be shared out among the people at least to enough of a degree to keep guillotines from being set up in each town square.
The regulators — and I know regulation is deeply unpopular — seem to be mainly missing the boat on this.
Guess customers and investors both are happy. The only people complaining are taxi companies and they probably have nearly zero clout at the state and national levels.
Twobeers, make no mistake that invisible hand exists for anyone who is willing to try to help themself. It doesn’t exist for those who always look externally for all the sources of their problems.
Socialists are blind to the effects of Socialism and always use some excuse to advocate for the increase of Socialism, even though it never works.
When Bobber complains about companies eating their seed corn, the real culprit is that investment banks have over-funded tech startups to operate at a loss so as to cripple existing market players. In the USA, it’s the investment bankers. In China, it’s the state bank. Slightly different systems, same result. But beware reader, neither of these is the result of unfettered capitalism. Any attempts to restrain the invisible hand will only result in violent market dislocations.
I wouldn’t be so sure about market share effects being too powerful here. There’s no real brand loyalty from either clients (who pick whatever’s cheaper as long as service is comparable) or drivers (who often register for multiple ride sharing services).
Uber already lost several markets (e.g. China and Russia) and will lose many more if they try to twist their customers’ arms.
You are right. Its about screwing the worker so the rich can get even richer. I tried uber for six months good for Pocket money crap to make a living from
What city do you drive in? How much did you get paid per hour before expenses?
I haven’t seen you on ZH in a while – and spot on!
I made this exact argument to my old man just this last weekend – Amazon has such free access to incredible capital. I kind of think it is by design at this point – but who knows.
Regards,
Cooter
I agree with Uber/Lyft not spending the capital to buy a car rental business. I do not agree that Uber/lyft will remain the only app/car/ride businesses even if taxi/rental take a thorough beating….just like Lyft came in and bruised Uber, others not know at the present will do the same and keep the rates scraping the bottom of the barrel. Somebody is going to loose a ton of capital in this business……
Amen! Then when you’ve done all that you eliminate the drivers using “autonomous” vehicles and profits roll in.
One thing I wonder about is the capital required to acquire the fleet and maintain it. Likely those “investing” in the project have figured that one out
@Buckaroo Banzai
You sum up very well the “new” bait-&-switch economy for an old business. Too bad for the new generation. They will either be the workers at the bottom of that food chain taking all the risks, and/or the consumers being gouged by the monopolies. We are still at the seduction and courting phase.
Very true. But the long term vision seems to still rest in a fully automated fleet of cars. In which case the company would eventually own a fleet of cars.
I wonder if it will be cheaper own and operate self driving car fleet. Or keep using the current model where they don’t have to own or maintain the vehicles.
They ,the incumbents will sell out or combine with the car manufacturers.
You are thinking of a static system. What do you think will happen once you charge drivers the minimum and riders the maximum? Tic toc… competition, who charge slightly less, or substantially less, perhaps at that stage even profitably from the get-go. The switching cost from Uber/Lyft to NewGuyCompany1 is zero for drivers and riders. The only barrier to entry to this market right now is the subsidised cost of the ride. The ‘network’, the drivers, the clients are very very hard to bind. Thank your lucky stars that unicorn-chasing investors globally are subsidising your transportation costs and enjoy it while it lasts. Who said billionaires don’t give back?
The problem with your logic is network effects. After years attacking Uber’s monopoly, all Lyft has been able to do is to chisel off a 20% market share. Maybe there is room for a third competitor who can figure out a way to capture maybe 5% by focusing on certain niches. There won’t be room for a fourth competitor.
Close to zero %?
Au contraire, I think most everyone sees the current uber/lyft contractor-driver model as only transitional until fully automated cars are ready (meaning they can reliably deliver their beta-testers alive and un-cooked, and all those sensors need to be able to find the road in a snow storm).
Today Uber & Lyft drivers pump gas and get service for their own vehicles on their own. When the “contractor” goes away, and Uber and Lyft want to field a fleet of autonomous vehicles, they will need *infrastructure*.
Refueling bays (charging stations), service centers, cleaning stations, etc. And some big parking lots for most of the fleet to sit in at 3:00 am. All this requires urban property. Airport locations. They are not going to be able to build up this infrastructure on their own easily.
The existing rental companies and large taxi cab companies all have this existing infrastructure and expertise at fleet maintenance (mechanics and management). They won’t have much business left by then themselves, so a combination will make good business sense.
The only reason why it wouldn’t happen is if all 3 of the big car rental companies manage to transition to autonomous-vehicle-for-hire companies on their own. They’ll all try, it’s the only chance they have, but my guess is that one succeeds and one each sells out to Uber & Lyft, because Uber and Lyft will pay the takeover premium to get the infrastructure in one shot.
But I think all this is 15 years away.
Thanks, that was what I was thinking
Excellent points. I’ve always thought the cost of owning and maintaining a fleet of driver-less cars would negate any savings from eliminating drivers. However, what if the end goal is actually a contractor model with driver-less cars? For example, let’s say I own a driver-less car and while I’m in the office working all day my car is out shuttling people around rather than sitting in a parking lot. Assuming the compensation is right (big assumption) it could be an effective way to monetize an asset that is sitting unused most of the day. Granted, it’s likely going to be many years before this scenario could play out, but it presents an interesting hybrid alternative.
We were suppose to have driverless taxis in San Francisco a couple of years ago. Wa happened?!? Well one guy got fried in his Tesla Model X because that stupid falcon doors wouldn’t open after collision. Some issue with the autopilot. One woman was mowed down by a driverless car while crossing the street. A few more misfires, I can’t remember. But no need for the faithful to worry, driverless cars are coming, just a few more people are going to have to die before that happens.
Somewhere about a year ago I saw something about a rental agency offering commercial insurance for rideshare drivers who rented cars. It makes sense – to be accepted as a driver your car can only be a few years old, and probably shouldn’t smell of your kids’ snacks.
From mid 2017 to early 2018, the sharr price of both Hertz and Avis doubled. As a business traveller, I can see that taxis and rental cars are now irrelevant 90% of the time. So while the rental car shares are now beginning to approach their real value, it is true that both sets of competitors have been irrationally encouraged by investors.
That share price that “doubled” in the time span you mention (“mid 2017 to early 2018”) was a dead-cat bounce:
Hertz (HTZ) went from $50 in Aug 2016 to $9 in June 2017. Then, in a dead-cat bounce, it rose to $26 by Oct 2017. It has since plunged 50% again to $13.
Avis (CAR) went from $50 in Jan 2015 to a low of $22 in Jun 2017. It then experienced a dead-cat bounce to $49 by Jan 2018, but has since plunged 34%.
So no, they’re NOT doing well.
Agreed, Wolf. To keep my comment shorter (I was typing on a smartphone) I deleted a comment to the effect that the real value is perhaps 90% lower. That is not based on any analysis, other than a rough understanding of how they are being impacted by technology (which was much improved by this article btw). Thanks.
You need to have a sizeable credit limit in order to rent a car. Even if the rental is only several hundred dollars, the rental company puts a hold of thousands on your credit card. In this economy many people no longer have the luxury of high credit limits. The car rental company practices are pushing customers to use Uber and Lyft.
Not to mention that renting a car means you still have to drive it yourself. With how cheap Uber and Lyft are, people go for them instead to have someone else be the driver.
We rented a car from Avis in Amerstam and drove it to Paris. During the rental period, apparently we got a tiny rock chip on the windshield- the rental car company notified us five months later that it was charging us €900 to repair, and we were on the hook for the entire amount. My husband refused to pay it because he felt there was no way to verify that we were the ones driving the car when the rock chip occurred, so they put us on a no-rent list.
that’s quite an exaggeration. Yes the rental car companies puts a higher hold on the credit card, but it’s rarely in the “thousands”. A typical 3-day business trip car rental would cost say $150, and the hold on the credit card would be around $250. That hold will be lifted once the final amount is settled at the end of the rental.
Many years ago, while on a business trip, a car rental company demanded a $10K hold on my credit card. Since I had a Spanish last name and am a woman, I knew they were deliberately trying to keep me from renting. When I told them that was fine, because my credit limit was much higher, they were taken aback.
BTW, they first told me the card had been denied, so I handed them another. They didn’t know what to do.
Uber & Lyft’s profitless business model is similar to Amazon’s. But Amazon had to expand from just selling books before it was in a position to crush brick & mortar retail. Lyft & Uber are crushing the rental car and taxi companies without expanding beyond their original ride share mission.
I wonder if ride share is just the beginning for these 2 Amazon imitators. Might they expand from the ride sharing business to eventually challenge Amazon as the place to go on line to buy everything, or almost everything. Amazon has not been able to become a car seller, but these 2 companies might.
You don’t understand Amazon’s business model. Amazon makes all of its profits from their AWS cloud services. Their online retail business is a loss leader that basically functions as a development platform for AWS. There are two possible futures for Amazon’s online retail business: either it effectively wipes out all retail competition, allowing it to raise prices and charge monopoly rents, or it will divest that part of the business as it is basically a financial boat anchor.
I’d give each possibility about a 50/50 shot. Pray to God it’s the latter, because if it’s the former that means we will be living in a dystopian hellscape.
on the retail side they make money on their 3rd party seller business and the FBA business (fulfilled by Amazon).
Small. It’s the same thing with the gold rush and people selling shovels in the end i.e. most of the money is on the later business i.e. AWS.
um, dystopian inputs, dystopian outputs, dystopian wholesale, dystopian distribution, dystopian retail, dystopian shopping, dystopian delivery, dystopian goods, dystopian consumers, dystopian outcomes, dystopian futures.
ah, concepts to ponder.
Do you believe AWS cloud hosting can support a trillion dollar market cap? How much cloud hosting does the world need and how long before cloud becomes a commodity and the margins get crushed?
I suppose, if they can completely lock up a monopoly position in internet retail, they may soon be able to price gouge on the margins in that business and it could become their primary and growing profit engine. Anti-trust laws are no longer enforced (If you factor in some required campaign contributions) so this seems feasible to me. In this event (controlling nearly all of the world’s retail business) a 10 trillion dollar market cap should be attainable.
How about this for a revenue stream: Pay us a $2000 annual fee or, as your only available retail option, we will cut you off from being able to make any purchases – pay us or live off the dandelions growing in the park.
van – there are people in the US who don’t make $2000 a year. I’ve been one of them.
You’re talking about a world where all restaurants are Taco Bell and we’ll have to learn to use the three seashells.
This is a misunderstanding of AWS. We use AWS in our company and what’s on offer is basically the means to get rid of your infrastructure people who often can’t explain why securing an extra server will take 6 months. I mean if your business is scaling rapidly, adding a server after 6 months seem stupid.
Most people have never worked in IT and don’t understand the challenges. They see “cloud” and they think storing movies, music, etc. That’s just data. What’s more important is the infrastructure.
I am not so sure that they don’t make money on retail. Taking a page from Walmart and Costco, Amazon has started pushing their own private label brands. Have you seen the push for amazon Basics lately? I recall a few years ago buying 9V batteries and then HDMI cables under those labels.
I think they’ll be able to make a profit on the retail side of the business. Their shift over to a Costco like model doesn’t hurt through Prime. In the long run, I easily see the retailers will start to focus more and more on their own brands to target consumers. This will push out traditional brands like Proctor and Gamble, Unilever, etc. Probably not major brands, but smaller brands will definitely suffer.
I contend Amazon has access to unlimited amounts of zero cost capital and they have deployed that weapon endlessly and at great expense to their competitors. It is, essentially, what is making things work for them (for now).
Consider, as an entrepreneur, what kind of business you could build with free money. I’m not talking the Mark Cuban I sold a six-BEE Delta-BAG to Yahoo, look at me I am smart sort of entrepreneur. I mean the real down in the ditch entrepreneur doing the dirty, hard work of selling real product/service to customers and making it work.
It won’t go on forever. Bezos is pissing off Trump – one of those two big boys is going to end up in a head lock – and it won’t be pretty.
If/when Amazon loses that edge – Walmart/Waltons will be on the ridge line with loaded magazines …
https://www.youtube.com/watch?v=5ZnzrzAt_Wk
I had to do the search for a song I KNOW … SEVEN times to get this link … I know how to search, I know how to work the engines. Eventually I got it (wasn’t easy)…
To be fair, I buy a LOT of stuff from Amazon – I have to in my situation (I live in a small town in Alaska) – but I am not stupid.
Only time will tell.
Regards,
Cooter
P.S. That link came from CDBaby – which has popped up on my radar over the past year. Small regional bands are using this platform to bypass the “top down” ownership/marketing of music. Essentially they provide all the marketing/etc, and the band provides the music.
My first encounter with them was with a band called “Mark Shelton and the Greater Good”. I hear a song they did called “Oklahoma Burn” which was incredible. I forwarded that on to Bill Wence and told him someone in California (this was a year ago now I guess) should buy it and tweak it to California Burn.
This is the band (the song is not posted here):
https://www.reverbnation.com/marksheltonmusic
I hope to go down south this winter and visit family, hope these guys are touring – their EP (published on CD Baby) was incredible, probably one of the best I have heard in years. And they got that thing going on that feels like it would be better live (i.e. ain’t produced).
Ironically, and this is just odd, but my first Uber was with a couple gals from Virginia at an accounting software conference (we escaped the BS sales circus built into the conference), and they hauled me to the St Louis zoo. The driver was originally from Austin TX, was a musician, moved to St Louis for the low cost of living, and published his music on CD Baby.
I still have his card, just haven’t had time to give his stuff an honest listen. On my to-do list …
It says “Jason Manker”… FWIW
Uber and Lyft clearly are not sustainable with their present rate structure. Once they wipe out the taxi and rental car businesses, they will be in position to raise rates and add all sorts of surcharges.
When self-driving cars become a reality (and this is just a matter of time), the large driver cost part of these ride share companies will drop dramatically and their market will then expand to compete with auto dealerships, as there will be serious question as to whether people should even own cars.
With delivery robots, they could even compete with UPS and Fedex
https://www.youtube.com/watch?v=eWgrvNHjKkY
Dedicated tech companies are the ones developing self-driving cars. Why won’t they cut Uber/Lyft out of the equation and field their own fleet? I don’t know anyone that works At Uber, but I imagine that Amazon and Google’s devs are better.
I think self-driving cars are fifty years away, not fifteen years away. Assuming we even get there intact as a species. IMO the only way that we get there in fifteen years is if a dedicated road network is built exclusively dedicated to self-driving car traffic. Given that our existing infrastructure is already falling apart, it seems hard to believe that we could afford to build the equivalent of a second interstate highway network simply to justify the existence of robot cars.
Your understanding of Amazon’s business model is materially flawed.
After founding, Amazon has never had a period in it’s corporate life that required on-going massive investor subsidy (aka further investment) to survive.
Amazon massively invests profits into further profitable (operating income) growth. Apparently it will do this until hit with anti-trust restrictions or it buys the US government (just kidding about the government thing…I hope).
Here’s a wicked scenario: what if Uber & Lyft merge as one, on the next few years?
Or the over extended Uber buys Lyft? Or one of the cash liquid rental company buys Lyft to diversify?
At the end of the day, Uber and Lyft continue their role as silent masters of slavery towards every driver doing the work. What happened to the concept of fairness to humanity?
Here’s another weird scenario:
What if interest rates continue to increase and investors get third of dumping “investment” into Uber & Lyft?
There is another ride share company that operates in New York City and Tel Aviv called Juno.
It’s expanding to Washington DC and Los Angeles soon. Has anyone heard of it or used its service?
Kasadour my daughter lives in NYC and uses Juno more than the others because it’s typically less expensive.
The market share of rental car vs. Uber/Lyft, is that calculated form dollar amount claimed on reimbursed expenses? Are there any controlled studies on the amount of reimbursed expenses on car rental vs. ride share on business trips? My personal anecdotal experience is that ride share costs more on a typical 3-day business trips – since my employer pays for it so it’s simple choice. On the other hand, employers during a downturn might clamp down on their T&E expenses.
Car rentals should on average be more expensive because of the added fees, even with a company discount, you still have parking as a potential additional fee.
This data is based on actual expense reimbursements — 10 million of them — processed by Certify via its expense reimbursement services that it sells to businesses.
I was at a car wash on a Monday morning waiting for my car to be finished. There were 2 Uber drivers there waiting at the same time while their Toyota Prius’s were getting washed. They were each getting the deluxe cleaning which cost an extra $10.
I listened as they discussed driving for Uber. They both seemed to like the freedom it provided. They talked about avoiding taking fares during the worst Bay Area traffic. It was also a revelation to hear them explain paying for the extra cleaning. Customer ratings were very important, it seems.
I think Uber/Lyft are here to stay.
It’s not clear to me yet if they’re here to stay or if they remain popular among large numbers. I suspect the main reason more people are using Uber/Lyft is because of the (artificially) low price. Investors subsidize the prices in order to gain market share, but if the low price is a huge part of the attraction, use of the service will decline once the subsidies are phased out. I mean, really, an Uber ride is not all that different from a taxi ride – you’re just being transported in a car. If that Uber ride costs $60 or even $40 when it used to cost $20, people will think twice about “just calling Uber”.
Additionally, Uber drivers will likely cop on to their low pay and exploitation, and the public could demand more regulation within the industry.
I disagree with the statement: “…really, an Uber ride is not all that different from a taxi ride…”.
The real difference is Uber/Lyft are available – try getting a cab downtown Market Street in San Francisco around 5-6p (cab shift change).
If city taxi services got together and modernized and computerized with phone apps, they could compute with Uber and Lyft much better. Instead of just driving around in circles, an forcing people to look for the taxi phone number, people could hail them with an app, just like Uber/Lyft. Washington DC did do that:
https://www.washingtonpost.com/news/dr-gridlock/wp/2016/02/11/the-d-c-taxi-app-has-arrived/
Gandalf
Agreed, it’s possible.
However, taxis are wrapped up in union rules & a bygone era of artificially constrained service levels (thus the taxi shift change in the middle of rush hour). Changing all that requires real leadership, plus changes from medallion owners, unions & city governments. That’s a lot of inertia to overcome.
I absolutely love the rideshare service for traveling, whether for business or pleasure, and will never go back. I started using Uber a few years ago when traveling frequently to NYC. Instead of spending sometimes 20 minutes trying to flag down an available taxi, spending an hour in the taxi line at the airport, or being out in one of the boroughs and not seeing ANY taxis – finding an Uber was at my fingertips. I love that I can see my driver arriving, and follow the trip on my phone to make sure am going to the right location. Cars are impeccable, and I’ve met some absolutely terrific drivers from all over the world with conversations I’ve never had riding in a cab. Drivers share how it gives them freedom from being cooped up in an office, and they earn pretty decent money. Those in large cities can actually make a good living driving full time, although most drivers just are looking for additional income. On a recent trip, it was not just cheaper to take an Uber to my destination an hour from the airport than to rent a car – it was so much easier, and I didn’t have to drive after flying for hours.
Of course you love Uber/Lyft–it’s massively subsidized by both investors and drivers. That $20 ride you’re paying for probably should be priced closer to $40 for everyone involved to actually make money–and at some point in the future, it will be.
what kind of a ride sharing ad bot comment was this^^^
Could employers like UBER/LYFT because it may provide details about where their employees are traveling ? With a rental car, there isn’t any tracking (that I’m aware of). I retired before these services hit prime time.
I am going to ask a dumb question. How does a company with a high valuation attached to its stock (PE), borrow so much money ? Have the creditors disregarded fundamental financing principles ? I can’t really find blame in these companies . Their always seems to be available credit to continue operations. As always great reads.
In this particular case, the companies are still privately owned, and their shares are not publicly traded. Most of their funding comes from equity investors that put billions into it in various “funding rounds.” Equity capital, unlike debt capital, never has to be paid back and doesn’t cost interest. Uber does however have some additional debt. Creditors believe that as long as equity investors stand behind Uber, ready to infuse more equity capital, their loans are in good shape.
Regarding rideshare and Amazon, I think Buckaroo Banzai is spot on.
Wait a few more years and I think a lot of drivers will drop out. Many aren’t making enough to cover their real expenses of operating an auto. While they have one that is bought and paid for, fine. Just cover gas and car washes. Wait till they have to buy another car.
As the baby boomers age, I can foresee demand for Uber, lift and such going off the charts, especially in urban areas. Think about it for a minute, the cost of owning a vehicle that gets driven (maybe) 5000 miles/year vs using Uber/Lyft as needed. The killer issue as you age is lack of mobility when driving skills start to fade. We’re not ready to give up that car just yet, but nice to have options. We already go out more at night because we can leave the driving to someone else. Bet we have lots of company in the future…
Everyone I know in their 20’s and 30’s and travels or gets out on the town use Uber and/or Lyft A LOT. I agree that, as long as the prices don’t go through the roof because the companies decide to make a profit, they will continue to grow like weeds for a while yet.
Demographics are in their favor!
“Demographics” doesn’t have anything to do with it–people of any age love a massively underpriced product. Anytime you can pay two quarters for a dollar, you’re going to keep doing it. Let’s see what happens when the price you have to pay for that shiny, clean car to show up in three minutes actually rises to something that reflects its true economic cost. Hello–supply and demand curves, anyone?? Microeconomics 101, remember it?
I wish we could get more Uber drivers to comment on how much you can really make. How much you NET after all the costs. The IRS gives self-employed people what 60 cents a mile to deduct for the expense of a car? So every time you get in your car it costs 60 cents a mile. Just one run to the airport in my area is about 40 miles so that is a cost of $24 in gas, depreciation, repairs, etc… out of the drivers pocket.
These guys all drive Prius, so maybe they are less than 60 cents a mile in costs due to great gas mileage and low repairs. But still, major depreciation with that much wear and tear driving likely hundreds of miles a day in stop and go urban.
90% of the Uber drivers in my area are sub-saharan African immigrants….Somali, Ethiopian, Senegalese, Nigerian, etc…
I can’t see how this is such a great life driving for Uber. You run your car into the ground, probably do not net a huge amount of money, you sit in traffic all day and drive around a city. Doesn’t sound like something I would be jumping to do.
This has been discussed in other comment threads. Best estimates, after ALL expenses are factored in, are around $8.50/hour average. That’s from an MIT study. If you go on discussion boards for ride share drivers, you hear estimates ranging from $7 to $12 per hour. I like to talk to drivers when I ride, and in my experience, some don’t really seem to care how much they make as they just do it occasionally for extra pocket money, so they obviously are useless as a source of information. The ones who try to make a living at it actually pay attention to all the costs involved, and my impression is, the smarter and more knowledgeable the driver is about the economics of the business, the more pessimistic they are about doing it for much longer. That’s not a winning labor model.
I’ve worked as a courier in Boston for many years. Uber and Lyft are about half of the work I do now. Demand in Boston is substantial, and I normally gross about 25/hr (often more). I have also given rides in Portland, Maine, and that’s one of the markets that a person would be hard pressed to earn a living rideshare driving in.
And, yes, for all the delivery work I do, Prius is a great vehicle to have. I’m on my third one. I buy them used since they’re so long-lived. I then switch them out when they get rough around the edges (around 250k). Although ratings methodology has made it easier to have a higher rating, it’s just nice to have a nicer car.
And, yes, you have to like city driving. The riders are really what make it. Extreme flexibility helps, meaning you can take a break anytime you want (except in the middle of a ride).
I often ask riders how they feel about the self-driving cars that seem to be on the horizon. I’m interested to see how it all plays out, and how long it might be before I have to stop driving. As others have said, it looks like it will be quite a while.
The other thing I wonder that I never hear anyone ask is how much does the tax payer subsidize Uber’s profits? I would guess a lot of these drivers get a ObamaCare subsidy, possibly section 8 housing and food stamps.
So Uber CEO and top shareholders get to potentially make billions from the “gig economy”, while the American taxpayer picks up the cost of the Uber drivers healthcare, and I suspect other welfare subsidies.
It would be fascinating for some investigative reporter to do some digging to see how many Uber drivers get ObamaCare subsidies.
I don’t see it that way – it’s always a question of the alternative. These drivers are doing this job because it’s the best thing available to them. I’m not sure why you think being able to fog a mirror is sufficient to guarantee a living wage – the company has to stay profitable or else it goes out of business, in which case the taxpayer is on the hook for EVEN MORE. Better that the taxpayer makes up the difference between what the company pays and what the employee needs to live, rather than pay the entirety.
I don’t quite agree with you on that. If a businesses entire model is based on gig workers who live at poverty wages, and they don’t have to pay any employee benefits, my point is the tax payer subsidizes that business model. The people at the top at Uber will make hundreds of millions if not billions, yet their WHOLE model is supported by the American tax payer picking up the tab for the drivers who make their model work benefits.
You haven’t addressed my primary point:
These people cannot add more value elsewhere, so them getting some income is better than no income. The taxpayer does not subsidize Uber – it is society’s decision to fund a safety net. Even if that safety net were taken away, Uber could continue to pay the same rates, since the drivers are do not have a more valuable skillset. That scenario would leave the CEO’s pay/bonus unchanged.
Wait, those tip numbers seem impossibly low. People really don’t tip their drivers? I guess I’m being way too generous.
That is surprising to me as well ….sad stats indeed. Generosity, such a simple way to express gratitude, which by the way serves to increase our own happiness. A win win.
Meanwhile, ranting about the rich, who have always been and always will be, is a lose lose….feasting on envy is self defeating.
Cause and effect are not linear. Cause and effect are circular.
Dunno about taxis, but renting a car located at an airport, in my experience, adds about 40%+ to the total cost (local tax, airport fees, depletion allowance, etc.). No compassion for “rich” out of town/state visitors.
The rental car companies will either get better local lobbyists, or die a slow death.
Why haven’t cab companies simply come up with their own app? If they want to continue to exist they just need to modernize to compete.
They’ve had an app for years. I personally know two cab drivers (one owns a medallion in SF). Both said they don’t get much business from the app.
I don’t use the ride-shares often. Originally I liked Uber better, but recently I find Lyft to be better for regular fair ride. I have not tried UberPool having recently learned about it (are cities censoring this!). What is not mentioned is there is often good conversation during a rideshare. The autonomous is nowhere near ready (wake me when we have flying cars, been waiting for decades.) Stack the BS high.
The autonomous will have trouble with inner-city driving techniques pervading the wider metropolis.
Believe it or not, there was a time when average persons, working a normal job, could earn a modest living. With a high-school diploma and a bit of ambition you could even get married and have a home.
But that was before the race to the bottom, fueled by cheap money, monopolistic practices, the absence of consumer or labor protections, and markets for just about everything rigged against you. For example, ride-sharing, so-called.
You wouldn’t want to quit your perfectly good part-time job at the Quik-E-Mart to do this, not when you have college loans to pay off.
All the protections we seek …what assures us the so called protectors actually share our interests? Their words? Certainly not the results.
Did business in a heavily regulated industry for years across many administrations…anybody paying attention would conclude that low level regulators are simply cogs in the machine; those who hold leadership positions are not motivated by providing protections. That is the sheeps clothing they put on when the little people are watching/listening. Much more honesty and integrity in doing business with wolves.
One point left off is the fact that some hotels charge up to $ 50 a day for parking add in the gas and cost of a rental and that is a lot of uber rides . When I took uber in Biloxi, Ms. The driver worked for both and uber and lyft
Would it be a good strategy to short the rental car companies stocks
Here in Oakland at the local Enterprise office almost all the cars are rented out. I wanted to rent a car for a day as I have done periodically and nothing was available. This was a Wednesday! Turns out all the cars were rented to drivers working for Uber. There was even an office with an Uber designation over the doorway. Is this a thing that’s happening everywhere? Does it portend a merger?
No merger, just rental car companies making money on Uber drivers. There have been startups set up to rent cars just to rideshare drivers. Not sure what came off them. Uber bought a fleet of cars and leased them to its own drivers, which turned into a very costly fiasco.
The thing is, many rideshare drivers don’t have the credit and income to finance a decent car, but they must have a decent car to get good ratings. So where do they get their cars? Enterprise found another niche to make a few bucks, as did others.
From the examples of personal computers, cell phones and tablets, here’s how I suspect the industry will end up:
– Self-driving car development companies (example: Waymo) will develop and maintain the self-driving system/operating system and license it to the car companies. They will handle updates and security fixes and roll out new features. They’ll work closely with the sensor hardware and microprocessor companies.
– The car companies (example: GM, Ford, Nissan, BMW) will build the self-driving cars and lease them to the operating platforms. They can use their existing dealer network to service them and might buy up the (defunct) taxi stands and rental-car lots to park/store them during down time. They’ll license the software to operate them to avoid the long-term development and patching hassles.
– The operating platforms (example: Uber, Lyft) will lease the cars, develop the online platforms, and handle billing and customer service.
Rental cars will probably remain as a small niche business as some places are too far away or too difficult to reach for self-driving cars to be useful/profitable. Taxis will be joining the buggy whip industry.
Stan
Wonder if Google will ever offer their own free rideshare app that drivers can participate in?
I had to pay 3000 for putting a small scratch in my last rental car in Ireland. Never renting again. When I take taxi from Newark airport, they do it off meter and it costs double Lyft. When my 2007 camry dies, I am using Lyft for everything. I live near Nyc, loads of drivers available all the time.