Despite Dangerous Bonus Schemes, Uber is Failing at Increasing Ride Volume among NYC Drivers

Txchick

Well-Known Member
Moderator
https://pando.com/2016/07/11/despit...ers/a5d1bc50987fc671d5784f4240141c01cd32368e/

Highlights of article:

Still, as the largest US city, with low car ownership, and the largest pool of professional drivers, it’s certainly relevant info. New York should be the dominant market for any transportation company that represents the future of how people get around.

The first batch of results showed in part what you’d expect: Uber is by far the biggest ridesharing company with some 170,000 trips a day, versus just 27,000 for Lyft and far less for Via and GETT. Taxis are still dominant: Doing some 400,000 trips per day.

But the most interesting thing to me was what was driving Uber’s growth: It isn’t drivers doing more trips, rather it’s upping the number of drivers signing up to the service.

From the report:

Vehicles dispatched by Uber per week increased 102% YOY between April 2015 and April 2016, and trips per vehicle per week only increased 10%. Lyft reported a 114% increase in trips per vehicle per week and a 354% increase in vehicles per week.

This is important because all of Uber’s talking points in the press and to lawmakers center around the opposite: That its technology and increasing market share is allowing drivers to be more productive, completing far more trips on a shift. This is key to Uber’s claims about how good it is for transportation and congestion in cities. This is Uber’s key defense in slashing drivers wages. And it’s key to Uber’s supposed only advantage in a driverless future: That somehow all that ride data has given it a way to better utilize vehicles.

It’s worth noting that taxis in New York have significantly higher utilization without all those mapped out trips and machine learning: Taxis represent less than half of the vehicles than Uber, but complete four times the rides.

If Uber is going to increase drivers’ volume in any US city, New York would be the easiest. It has density, lower car ownership, and a huge fleet of existing professional drivers. If it’s not doing it in New York, you can believe volume isn’t making up the wage cuts for drivers in, say, Detroit.

More interesting is what this means long term when it comes to these companies’ economics. Uber has argued it’s profitable in the US, but part-time, extra cash jobs have incredibly high churn rates. It has to be a drag on the company to constantly be paying out subsidies to recruit new riders and spend marketing dollars and bonus schemes to acquire drivers who are far less productive than cabs. Uber knows this: Its New York bonus schemes incentivize its drivers to work dangerous amounts of hours, never mind all its promises about ending “drowsy driving”. It has pegged any hope of making a living wage driving an Uber to volume, in hopes of changing this trend.

That this is the case even in a market like New York where there are more full-time professional drivers than anywhere else in the US speaks volumes of how much (or how little) of an advantage Uber’s base of drivers ultimately is against competitors.

What would happen if everyone in the space simply stopped spending money on growth for one month? We’ll never know, but the answer would certainly be dramatic.

Lyft committed to investors it was “only” going to spend just $50 million a month, and true enough after rapid year over year growth in May, it didn’t grow in June.

And that may be one reason Uber is putting off an IPO as long as it can. We know the truth is ugly in markets like China, where Uber is spending more than $1 billion a year to have low double digits in market share. But it may not even be palatable in markets like New York, where Uber’s economics should be the most advantageous.
 

KevinH

Well-Known Member
As I read this story, Uber/Lyft has doubled/tripled their fleets and still the number of jobs per car have increased. Many other areas have been flooded with new drivers resulting in less work per vehicle and a significant drop in driver income. Does the New York model show that sustainable TNC growth is possible in some markets? A Lyft driver would apparently be making over twice the money as last year even as Lyft increased their fleet by 354%. The other lesson that comes from New York is that much of the TNC work is new business, perhaps from undeserved areas or customers that have a hard time hailing a cab or getting a black car service to come to them. The New York model gets to the core of two questions; 1: Where does e-hailing fit into an urban transportation scheme? And where should e-hailing fit into an urban transportation scheme? 2: Can a properly regulated and tech savvy taxi industry meet the needs that New York has clearly demonstrated? In many ways the NY model (and a somewhat similar London model) is very unique with street hails going to yellow cabs and phone orders going to black car services. But as worldwide cities grow and populations become concentrated, is NY a peek into the future of urban transportation? It does take forward looking regulation combined with tech advances in taxi services, so collaboration between the transportation industry and regulators is key. Take at look at Montreal, where entrepreneurship, innovation and forward thinking government has provided a glimpse of what is possible.

Finally, someone does Uber right! E-hailing, electric vehicles, hourly wages with social benefits.
https://www.thestar.com/news/insight/2016/05/22/meet-the-montrealer-who-gave-uber-a-jolt.html
 
Last edited:

Atom guy

Well-Known Member
At some point they are going to have to stop worrying about the # of rides and worry about the profitability of rides instead. You can look at the auto industry for comparison. For decades the Detroit automakers with their over priced union contracts ran the factories at full tilt to maximize the utilization of the expensive labor, but then on the other end had to heavily subsidize the sales of the vehicles. In the end 2 of the 3 automakers went bankrupt, and they all decided to chase profitability at lower sales volumes instead of chasing market share. Uber will need to do the same. While they try to buy rides with discount codes and buy new drivers with signing bonuses etc, they are lowering standard for the cars they approve and the drivers they approve, and hurting the long term image of the brand in the eyes of the consumers.
 

tohunt4me

Well-Known Member
At some point they are going to have to stop worrying about the # of rides and worry about the profitability of rides instead. You can look at the auto industry for comparison. For decades the Detroit automakers with their over priced union contracts ran the factories at full tilt to maximize the utilization of the expensive labor, but then on the other end had to heavily subsidize the sales of the vehicles. In the end 2 of the 3 automakers went bankrupt, and they all decided to chase profitability at lower sales volumes instead of chasing market share. Uber will need to do the same. While they try to buy rides with discount codes and buy new drivers with signing bonuses etc, they are lowering standard for the cars they approve and the drivers they approve, and hurting the long term image of the brand in the eyes of the consumers.
Lack of Quality killed Detroit.
 
Top