Will Uber and Lyft Continue to Be a Viable Mode of Transportation?
Rideshare services were an instant hit when they first launched. Booking through an app, getting picked up at your door and dropped off at your destination, for a reasonable price, was a very attractive proposition.
These services have now been around for more that a decade, with Uber and Lyft having the largest market share in the country, and also in most places around the world. But if you have booked an Uber or Lyft ride recently you might have noticed that prices are much higher than a decade ago. And that’s not only because of inflation or some newly added gas surcharges.
Rideshare prices have been going up for a while now. Data shows that prices were up as much as 92% between January 2018 and July 2021. That was in part because of a shortage of drivers who stopped working for these companies during the pandemic. Another survey shows an increase of 45% in the first quarter of 2022, compared with the same (pre-pandemic) period in 2019.
But will prices go back down once more drivers join these platform? Probably not. Uber has been burning through its investor’s cash throughout its existence. The company has lost more than $30 billion in just the last five years since its finances became public. Lyft and other ridesharing companies also follow a similar strategy, hoping to corner the market and then hopefully become profitable.
But so far, even these increasing fares that are becoming more unaffordable for the average American, are still heavily subsidized by investors.
Uber’s CEO Dara Khosrowshahi recently told employees in an email that the “the market is experiencing a seismic shift and we need to react accordingly”. To address this shift, Uber will slash spending on marketing, incentives and hiring. “We have to make sure our unit economics work before we go big,” Khosrowshahi wrote. The Uber boss said that Uber will treat hiring as a privilege and be deliberate about when and where to add more employees. “We will be even more hardcore about costs across the board,” he said.
Can Uber and Lyft ever be profitable and offer affordable prices for their ride-haling services? Maybe self-driving cars will make that possible? Who knows what the future holds! Let us know what you think!