Now that Uber and Lyft are trading on public markets, the ride-hailing companies are under pressure to achieve years of rapid growth, the Wall Street Journal reports.
First they will have to figure out how to hang onto drivers like Carl Wagoner, a Lexington, Ky., minister and potter who last summer drove for Uber to earn extra cash.
The gig proved less lucrative than he thought, about $5 an hour after gasoline, he calculates, given that he avoided the higher-priced, late-night bar crowd. He quit within six weeks. “Just wasn’t worth it,” he said.
Uber and Lyft are banking on a future where evermore riders surrender their cars and rely on ride-hailing. But that vision assumes the companies will accomplish a trickier task – finding and keeping the millions of drivers needed to whisk them around, the Journal notes.
By relying on a workforce of independent contractors, the companies are dealing with drivers who can simply turn off their app when they want to stop working. Drivers also can toggle back and forth between services, depending on which offers more money.
Uber and Lyft have paid billions of dollars combined in incentive payments to keep drivers, helping contribute to a combined $5.4 billion in losses over the past 12 months through March. Despite the incentives, drivers protested in several major cities last week to bring attention to low wages.
Multiple economists have estimated Uber and Lyft drivers earn on average between $9 and $16 an hour, after accounting for various expenses the contractors are responsible for, such as gas and maintenance, the Journal writes.
Uber, in the filing for its initial public offering, highlighted retail, wholesale and restaurants as sectors that offer wages similar to its drivers. But those sectors have struggled with the tight labor market, with many employers increasing wages. Amazon.com Inc., Costco Wholesale Corp. and Target Corp. have or plan to raise their minimum wage to at least $15 an hour. All are profitable companies.
Questions about the unprofitable business models have tempered investor enthusiasm for both ride-hailing companies. Uber’s stock fell 7.6% in Friday’s market debut, erasing $6 billion in market value, while Lyft’s shares are down about 29% since its March offering.