Likewise for Lyft and Uber; they just haven't fully collapsed yet -- but give them another 2 years. There will be a smoking pit in the short-range transit market because it costs at least twice what riders pay today just to keep the drivers making the same amount when the VC subsidies go away, and nobody is willing to pay that. You're already starting to see the subsidies dry up with food delivery services where there's an additional $15-20 in fees.
The next recession is going to be a bloodbath for a lot of low-income people when the demand for the gig economy dries up.
Even if this is true (which it might well not be--VC investment money for a startup usually goes to build infrastructure, not to enable under-cost pricing; the former increases your runway while the latter decreases it), it's only for the short term; if Uber and Lyft don't start operating at a profit at some point in the near future, the VC investment will be gone and they will have a hard time getting more. Public transportation, by contrast, has been subsidized for decades, because it doesn't have to answer to market forces, only political ones.
Until the VC money runs out and the poor(er) have zero choice. Those people chose to give their money to Lyft / Uber instead of supporting their local public transit. Fast forward through Uber/Lyft's 'disruption' the local public transit shuts down due to lack of funds for maintenance, upgrades, etc. The public transportation ridership will be at an all time low, so it would be very hard to get tax payers to shoulder the burden of the costs... Seems like a sad state for the future.
It's only a matter of time before Uber and Lyft cease to exist. Lyft lost what, $1.5 billion last year? The trend isn't towards profitability, and they have had plenty of years to work out the kinks and figure out structural issues.
I've said it before, and I'll say it again - if you were to pay for real cost of overhead and to pay the driver, you'd end up with a price that no customer is willing to pay.
Uber has briefly entered profitability, but only by absolutely shredding any pay to their drivers, who will jump ship eventually.
The reality is that once investors wake up and close their pockets, these companies vanish into dust. It's either that or their drivers will abandon them.
Consequently, the cost of a ride will approach the level of direct costs like fuel and maintenance. There won't be much left for driver compensation or vehicle depreciation, much less a durable surplus for the network operator.
Paradoxically for the disruptors, the way out of this trap is for Uber and Lyft to lobby for greater regulation, stringent requirements for insurance and liability, background checks, safety inspections and government licenses. They need higher barriers to entry.
They need to carve out a space safe from competition, or it will rapidly devolve into a lowest-common-denominator market.
Welcome to the boom half of a boom and bust cycle. It’s lasting longer because the amount of capital invested in subsidizing Uber/Lyft but it’s still going to turn eventually.
Lyft and Juno will run out of cash by the end of this year and be forced to sell to companies that won't run them at a loss, that Lyft $500 million round they are trying to shop around won't happen (that leak is a bad sign, early Lyft investors are dumping their shares on the secondary market as well) and Uber currently has billions in the bank while Lyft is down to under 1 billion, Uber will raise prices and no new competitors will be able to find any funding at this point
Uber and lyft are both on the way down. The price at which they need to operate to be profitable is not a price that most americans are ready to pay. As simple as that.
For now they delay this reality by subsidizing rides in order to generate business. In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive.
(Comment that I already issued yesterday on a similar thread)
Presumably prices will increase to a sustainable level if the big VC-money-burning firms go out of business. I can see ride sharing becoming more expensive -- I just don't see any future in which it goes away.
As I said, they might be able to pay drivers less during a recession but if total ridership is down they are still going to be in trouble during a recession. If they have problems reaching profitability now I don't understand how a recession will do anything but harm them.
They're not. If (when) Uber does eventually collapse, I bet Lyft will have to switch to more standard Taxi rates (they already do in a lot of places) in order to not go under themselves. They're operating with losses as well.
Lyft has bought up a lot of bike share, e-scooter rental and other alt transport companies. So that might shore them up for a bit longer.
If anything, during a recession, more people will want(need?) to become gig workers. Uber/Lyft are generally supply constrained today. If there’s a surge of supply because people need money they won’t have to pay new driver incentives, which is one the areas that cause them to bleed cash today. Demand side will fall a little, but people will still need cheap ways to get to/from places, maybe especially if their car gets repossessed.
The problem with both Lyft and Uber is they have MASSIVE VC investments they need to pay back, and while the business model is good its not nearly good enough to payback VC within the 10 year window. Uber will be in the exact same boat next year.
As far as I can tell from how frequently Uber and Lyft give me discounts whenever I don't use them for a few days, they're burning crazy amounts of VC money just to grow.
If investment dries up before they get profitable, I think they're screwed.
The prices will go up and then, at least in the bay area, some time will pass, then some other ride share company with a slightly different take on things will start with their own VC subsidized business model. We'll all switch to it, bemoaning how Uber/Lyft used to be so much better before they got greedy and raised the prices.
The next recession is going to be a bloodbath for a lot of low-income people when the demand for the gig economy dries up.
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