Why Did Ridesharing Get So Expensive?
The magic of summoning a car to take you from Point A to Point B used to cost almost nothing. Now, the 10-minute rides with Uber or Lyft that used to cost $10 can now cost $20, $30, or even $50.
So, what happened? And just how did ridesharing get so expensive? And can someone tell me just how I’m supposed to get to our champagne brunch this weekend?
*Cries in millennial*
Like you, we’ve seen the news over the last year about increasing rideshare prices. Maybe you’ve even experienced it firsthand.
To get to the bottom of this, we found some figures and ideas that help to explain the prolonged surge.
$30 Billion Loss
On your worst day at work, how much would you say you lost your company? Maybe a bad presentation cost the firm a potential project or a bad hire cost some legal fees.
I bet it doesn’t come close to the amount Uber has lost. Since its finances were made public, Uber has run at a loss of close to $30 billion. That’s an investor-fueled subsidy that keeps prices artificially low. Unfortunately for riders, Uber can’t continue to lose many billions of dollars each year just for fun. Something has to give, and that something helps to explain our next number:
92% Rise In Prices
From January 2018 to July 2021, Rakuten Intelligence found that the average rideshare price rose 92%. This isn’t just the occasional surge price soaring up late at night - this is any ride at any time.
Part of the problem? Ridesharing companies need to start recouping some of those losses.
An even bigger part of that problem? A driver shortage. At the end of that study, Uber and Lyft were 40% below driver capacity. Though the companies were already subsidizing rides, they had to then turn to spending even more to incentivize drivers to return.
Ridesharing Doesn’t Scale
One of the curious things about Uber is how often it’s talked about in tech company terms like growth and scale. Of course, operating in 71 countries is impressive.
Scaling, though, should mean there are efficiencies that come from a larger company. As Refinery29 argues, Uber doesn’t actually have any of these operational efficiencies. They are not more efficient than taxis or other rideshares.
The technology of connecting driver to rider has been easily emulated. If anything, the only place they were able to operate more cheaply was by taking advantage of willing drivers - and that was far from a sustainable strategy.
When looked at it this way, it’s clear that as the investors look to make Uber profitable, the money has to come from somewhere else.
Gas Prices Up Almost 50%
As if inflation wasn’t enough fun for us, earlier this year gas prices jumped 18.3% in a month. Over the past year, gas prices are up nearly 50%.
Naturally, if you want to go somewhere using gas, the prices you’ll pay will go up, too. Uber and Lyft have compensated with surcharges of up to 55 cents per ride.
The issue with a flat rate surcharge is that it doesn’t compensate for longer distances. Those costs could prove to be too high for drivers, leading to a driver shortage, and even higher prices to follow.
As millennials who experienced the birth and boom of ridesharing services, these higher prices are unfortunately a bit of a wake-up call. Still, perhaps there’s a silver lining.
Though using rideshares is less carefree as it once was, it has become - in its maturity - a bit more honest.
As we get closer to some semblance of ridesharing transparency, at least we can make the right decision for ourselves (and our wallets).