People are thinking twice before opening that ride-share app on their smartphones.
The practice is going nowhere, but the slow pace at which ride volumes have recovered from the depths of their pandemic is the latest sign that the industry may not be as sweeping as once hoped. As dreams of world domination fade and investors look to the bottom line, the cost of that ride could push some potential customers to more affordable forms of transportation.
More recently, market leader Uber Technologies has moved on from the service that made its name verbose. According to its 2022 Investor Day deck, Uber is in 72 countries. It added Eats to food delivery, and then expanded to include convenience, alcohol, diapers, and more. It is now combining taxi partnerships and travel, among other things. Soon, you’ll be able to cheer for your own personal party bus.
These additions are projected externally as a way for Uber to aggressively build a super app from a position of strength. They are arguably just as defensive. If investors ever wanted quantity, they now want quality. As Chief Executive Dara Khosrowshahi recently wrote in an internal email: “In times of uncertainty, investors look for safety … we need to show them the money.”
The economics of ride-hailing have changed. Platforms such as Uber and Lyft grew over the years through subsidizing the cost of rides along with other forms of transportation to win market share from each other. Between 2016 and 2021, Uber burned an average of about $3 billion annually.
But with investors now focused on keeping cash in pockets rather than rolling around, widespread subsidies are no longer a winning strategy. And that discipline comes at a time of rising costs. Labor laws, competition and booming vehicle and pump prices mean ride-hailing drivers need to pay more. The combination of those costs and investors’ profit and cash flow demands means that post-pandemic rides may never be as affordable as they used to be.
Nationally, average ride-hailing pricing in April was already up about 39% from where it was at the same time in 2019, shows Yipitadata. Some of this has to do with the long ride that consumers are now taking. But even on a per mile basis, the pricing was up 27%. In Phoenix and Atlanta, pricing per mile averaged about 40% and 50% for Uber and Lyft combined.
The pandemic may ease, demand for more tourists and commuting, but consumers are likely to consider cheaper alternatives amid rising rates and prices for other goods and services. And the pricing could get even richer. Facing driver shortages, Lyft may need to compensate with higher rider rates to compete. In the meantime, if Uber continues to push for aggressive growth in food delivery and other non-core businesses, someone has to shoulder that tab.
Ride Haulers are ready to free us from car ownership and provide us more convenience and comfort as compared to other available transportation options. What if the future of ride-share is… just?
This story has been published without modification to the text from a wire agency feed