Your Next Uber Could Be the Bus

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The cost of rides might be pushing some to more economical transportation

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Lately, market leader Uber Technologies has moved beyond the service that made its name a verb. According to its 2022 investor day deck, Uber is in 72 countries. It added Eats to deliver food, and then expanded that to include convenience, alcohol, diapers and much more. It is now adding taxi partnerships and travel, among other things.
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Soon, you will be able to hail your own private party bus.

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These additions are outwardly pitched as a way for Uber to aggressively build a super app from a position of strength. They are arguably just as defensive. If investors once wanted quantity, they now want quality. As Chief Executive Dara Khosrowshahi wrote recently 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 like Uber and Lyft for years grew through subsidizing the cost of rides to win market share from other forms of transportation, as well as from one another. Between 2016 and 2021, Uber burned an average of nearly $3 billion annually.

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But with investors now focused on pocketing cash rather than splashing it around, broad subsidies are no longer a winning strategy. And that discipline comes at a time of rising costs. Labor laws, competition and a surge in vehicle and pump prices have meant ride-share drivers need to be paid more. The combination of those costs and investors’ demands for profit and cash flow means postpandemic ride-hailing may never be as affordable as it used to be.

Nationally, average ride-hailing pricing in April was already up nearly 39% from where it was at the same time in 2019, YipitData shows. Some of that has to do with longer rides consumers are now taking. But even on a per mile basis, pricing was up over 27%. In sprawling Phoenix and Atlanta, per mile pricing for Uber and Lyft combined was up around 40% and 50% on average, respectively.

The pandemic may be waning, spurring more tourist and commuting demand, but consumers are likely to consider cheaper options amid rising rates and prices for other goods and services. And pricing could get even richer. Facing a driver shortage, Lyft might need to compensate with higher rider rates to compete. Meanwhile, if Uber continues to push for aggressive growth in food delivery and other noncore businesses, then someone has to shoulder that tab.

Ride hailers set out to free us from car ownership and provide us with more convenience and comfort than other available transportation options. What if the future of ride-share is…the bus?

Write to Laura Forman at [email protected]

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Credit: www.Businesshala.com /

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