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Will Uber and Lyft Kill Rental Cars?

Colin Shaw | Jan 13, 2017 812 views 17 Comments

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Back in November, Hertz rental car shares fell sharply when the huge rental car company slashed its profit forecast for the year. Hertz (which also owns Dollar and Thrifty) blamed it on vehicle depreciation, but depreciation may be the least of the rental car industry’s worries as we move into 2017.

Over the past several months, I’ve become a fan of Uber and Lyft. With these services at my fingertips, I’ve discovered that I seldom need to rent a car when I travel. I avoid long lines, confusing contracts and surcharges. I have a driver to chauffer me about and I don’t have to learn my way around a strange city!

In a recent column, New York Times writer Ron Lieber reports that he also avoids renting cars when he travels. Uber and Lyft’s apps make summoning and paying for a ride effortless, but rental car companies seem bent on making the experience as difficult and unpleasant as possible.



For example, I’ve written about reports that Payless Car Rental imposes draconian refueling policies and charges customers for insurance that they declined. But Payless isn’t the only one providing negative experiences. Here are a few incidents that I or the people I know have encountered at a variety of rental car counters in the past few months:

·      Reserving a car online, and then arriving at the rental car facility and being told that there were no cars available. Getting a car only after traveling to another location across town. And not being offered any discount, upgrade, or even an apology.

·      Renting a car that smelled like smoke, mentioning it, and being told, “Oh, well, I guess someone smoked in it when they weren’t supposed to.” Again, no apology, discount, upgrade or offer to switch to a different car.

·      Taking a shuttle from the airport to the rental car location, waiting in line for 20 minutes to speak to an agent, and then waiting another 20 minutes while the agent mysteriously disappeared. Then being sent out in the dark with a form (but no pen) to inspect the car and mark any pre-existing damage.

·      Being told that the car had to be refueled within one mile of the rental location, being assured that such stations existed, and then being unable to find one that was open at 5 am!

Add to this the usual confusing car classes (what exactly is the difference between compact, economy and intermediate?), array of refueling options, and scary insurance waivers and it’s no wonder I’d rather just use Uber.

Think back to the last time you rented a car. What do you remember about it? If you’re like me, you remember the interaction you had at the rental car counter – how you were treated, how easy it was, whether they had the car you expected, and how stressful it was to complete the paperwork. If things went badly, you remember not only the negative experience, but also the name of the rental car company that provided it.

It’s these kind of memories – good and bad – that build or destroy long term value for any brand. In the case of rental car companies, when we have bad memories of interactions with multiple companies, it begins to destroy value for the industry as a whole. I discuss this in depth in my recent book, The Intuitive Customer: 7 imperatives for moving your Customer Experience to the next level, co-authored with Prof. Ryan Hamilton of Emory University.

And as Uber and Lyft expand into more areas and add services like advance reservations, rental car companies are going to start losing more business if they don’t start paying attention to what their customers want and need. In our customer experience consultancy, we’d use tools like customer mirrors and behavioral journey mapping to understand what customers are thinking and feeling and design a better experience.

But I don’t expect big changes from the major rental car companies anytime soon. As Mr. Lieber noted in his column, Hertz and Avis didn’t even return his calls asking for comment.

Would you rather catch a ride with Uber or Lyft, or rent a car? Tell me what you think in the comments section below.

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17 Responses to Will Uber and Lyft Kill Rental Cars?

  1. scott myers January 13, 2017 at 6:37 am (4 comments) #

    Hi Colin,

    Enjoy Uber and Lyft while they last.

    Here is the deal with Uber – quick and simple:

    1. Uber is good for the rider – but will get worse as the quality of the drivers deteriorates, especially now that Uber offers sub-prime loans for folks with credit scores of 500-600, who will become indentured drivers to Uber. And Connecticut has just softened background checks for drivers in that state – please see http://www.courant.com/news/connecticut/hc-uber-connecticut-criminal-records-1118-20161118-story.html

    2. Uber is bad for the drivers as evidenced by the 50% annual turnover rate and the need to attract non-credit worthy drivers and drivers of questionable backgrounds as referenced above.

    3. Uber is bad for Uber because they will not be able to ever turn a profit. If they raise fares they lose customers. If they lower fares, they lose drivers at an even faster turnover rate. In the meantime, even though they have 85% of the ‘market’ compared to Lyft’s 15%, they have to compete ferociously with Lyft, which means paying driver referrals and bonuses, which is unsustainable without fare increases.

    4. Critical mass for 100% fully autonomous vehicles is at least 10 years (40 quarters) away and will require hundreds of billions of dollars of additional investment to get there. By critical mass, I mean tens of millions of vehicles in use and at a cost of travel that is less than that of car ownership. And Uber will have plenty of competitors in this space, including Google, Toyota, Nissan, BMW, Volvo, GM, Ford, Daimler, Audi, Baidu, Honda, Hyundai, PSA Groupe, and Tesla – see http://www.businessinsider.com/companies-making-driverless-cars-by-2020-2016-10/#volvo-is-aiming-to-make-its-cars-deathproof-by-2020-by-rolling-out-semi-autonomous-features-in-its-cars-eventually-working-up-to-fully-driverless-ones-6.

    5. What major successful company has endured where the customers are happy (trending to less happy), the de-facto employees are miserably exploited, current and future competition is and will be brutal, and the company is losing money hand over fist? Pretty short list, no?

  2. Jeff Kirk January 13, 2017 at 12:42 pm (9 comments) #

    Colin,

    I’m afraid this news isn’t particularly new: use of ride-hail vehicles among business travelers has exceeded use of rental vehicles for nearly a year now. Also, most road warriors worth their salt know exactly how to avoid all the rental-car pitfalls you cited (and many you didn’t): sign up for Avis Preferred or Hertz #1 Club Gold and walk directly to your vehicle upon arrival at their lot. Most of their locations allow you to swap your assigned vehicle with any other available one in its class as well. While I’ve had the no-cars-available thing happen on other occasions, it’s never occurred *once* when I’ve had a preassigned vehicle.

    Still, business travelers (including me) often prefer Uber or Lyft for other reasons, ranging from the expenses involved with renting cars — even at the corporate car-rental rates I get, there are still massive parking fees at most urban hotels — as well as the time factor, e.g. getting picked up and dropped off right at the terminal instead of having to take a shuttle bus to/from an offsite rental lot, which is now the norm at most major airports.

    As for killing off rental cars entirely: no, or at least not in the foreseeable future. Rental cars are an absolute essential for many, if not most, leisure travelers visiting places other than large cities, most of all families with kids (and in particular younger kids under 8 or so). Even if they have to deal with airport hassles, the favorable logistics of using rental cars — being able to drive 40+ miles with 5-6 people in the car for no extra money; strapping in car seats once and being done with it; etc. — outweigh any such comparatively minor inconveniences.

  3. Jeff Kirk January 13, 2017 at 12:44 pm (9 comments) #

    I’d also like to address Scott Myers’ comments about how Uber is “bad for drivers”: regrettably, a lot of the statements he made are either misleading or outright false, and much like the American media was manipulated by Russian propaganda during the recent presidential campaign, the taxi lobby — which is vastly larger than most realize — has been running a stealth anti-Uber campaign for several years now. A lot of people have bought what they’re “selling,” in part because Uber is a company that admittedly generates a fair amount of schadenfreude. Before going any further, however, I’d like to make clear that I do not work for Uber, Lyft, or *any* company related to the ride-hail business in *any* way — which I’m adding as a disclaimer because people viewed as “Uber defenders” are almost invariably accused of being “shills” on online comments boards. I happen to know a lot about ride-hailing because I’m an attorney with a specialty in consumer law, and Uber/Lyft popped up on my radar for possibly anti-consumer practices — for drivers, that is — almost three years ago now. (All of the allegations proved to be false, by the way.)

    To specifically address Scott’s comments:

    1. The tale about it being “impossible to make a profit” driving for Uber/Lyft is categorically false. Further, it’s an insult to the millions of people who drive for them, seeing as the argument in effect centers on the premise that their drivers are not smart enough to factor in expenses like gas and wear-and-tear and other operating expenses in determining their net earnings. In reality, the vast majority of drivers for both companies work primarily during surge-pricing hours, which are roughly 8pm-4am on Fridays and Saturdays, and in some cases Thursday evenings as well (and, of course, holidays). As such, they readily net $20-25/hour or more during peak hours.

    2. The notion that Uber *itself* will never generate a profit is also false, and generally being peddled by people who don’t understand the basic economics of the VC-fueled tech startup world. Like most startup companies, Uber is *intentionally* losing money in order to gain market share (as is Lyft). The admitted difference is that Uber is doing so on a scale that may very well be the largest in the annals of corporate history. One of the key *lures* of a ride-hail company to a potential investor is the fact that its basic business model has virtually no overhead: Uber and Lyft rely entirely upon cars they do not own and drivers who work on a for-hire basis. Also, they employ vastly fewer people (by this I mean office employees, not drivers) in contrast to other companies with similar valuations.

    (NB: In reality it’s quite a bit more complicated: both companies have admittedly expended huge sums solely on their server/network setups, among other things. In Uber’s case it can *simultaneously* track — in real-time — at least five million rides across 75+ countries; accurately track *any* car’s location via GPS (meaning *all* cars in which the Uber driver’s app is on and activated); accurately tabulate the running *fee* for each trip; and automatically email a passenger a receipt — including a copy of the exact route their driver took, superimposed on top of a Google map — within seconds of a trip’s end. Still, by now Uber and Lyft have fully built out their systems, both of which have virtually nonexistent down time, so this is not a significant ongoing expense.)

    The one major reason Uber — though not Lyft — *might* never achieve profitability is if it lets its R&D costs for its autonomous car project spiral out of control, which already occurred with them during their failed attempt to take on the Chinese market. That said, Uber can be — and already *has* been — profitable solely from its ride-hail operations; it proved its ability to do so in one quarter last year (at least domestically). THAT said, Scott is entirely correct that Uber has a huge number of competitors in the driverless-car space, and there’s no guarantee whatsoever that they’ll succeed (particularly against Google, which is not only eight years ahead of Uber in AV R&D, but is also sitting on one of the biggest piles of cash in the corporate world ($83 billion)).

    3. Uber and Lyft have cut their incentives for new drivers entirely in many markets, and by 80% or more in most others — which leads me to address a falsehood concerning their driver churn rates. Uber’s and Lyft’s admittedly high turnover rates are mostly attributable to them being mere “gigs” for drivers, not drivers becoming disenchanted with their work. The most common scenario for someone considering driving for one or both companies is that they already have full-time-salaried jobs — which describes over 80% of Uber/Lyft drivers, in nearly every US market — or are outside of the formal workforce entirely (e.g. they’re in college or retired), but have a short-term need to earn some extra cash for paying off credit cards, saving up for a vacation, etc. Once they’ve made whatever amount of money they need, they often exit the business immediately (which is one of its key lures: quitting is literally just a matter of turning off the app!).

    4. The notion that most Uber/Lyft drivers “loathe their jobs” or “feel like they’re indentured servants” is also false, and it stems almost entirely from disgruntled former drivers posting on various online forums, usually enabled by taxi-industry flacks who “support” them. (As is often the case, the loudest voices in the room should never be mistaken as being *representative* of everyone in the room.) The preponderance of these drivers appear to have made at least one of two mistakes with respect to driving for Uber: they tried to do so as a full-time vocation, and/or they drove in what is unquestionably the worst market in the country for ride-hail drivers: the greater Los Angeles area. Drivers there make the least per mile; pay the most for gas; get stuck in (very-low-paying) traffic jams most often; and most frequently have to “deadhead” back (e.g. take a passenger way out to the suburbs but not get a paying passenger for the return trip).

    As for ride-hail driving as a full-time job: it doesn’t work. Period. (This is why driving *taxis* is an all-around hellish proposition, given that nearly all taxi drivers are forced for various reasons to work full-time.) There is simply not enough passenger traffic to sustain Uber/Lyft drivers working more than around 25 hours per week; they hit the point of diminishing returns quickly after that point, and it only worsens the more they try to drive. THIS is one of the only ways a driver is likely to not generate a positive net income.

    Finally, Connecticut just “softened” its rules for prospective drivers in a *good* way, from a sociological and progressive perspective. People convicted of petty misdemeanor crimes pose zero danger to the public, and they shouldn’t be forced to wear a de facto “scarlet letter” when it comes to obtaining employment. If anything doing so makes it much *more* likely that they’ll commit a more serious crime, if they’re unable to secure legitimate work. It’s already been proven MANY times over that a hard-core “all ’em all up” philosophy, still endorsed by some right-wing conservatives, has zero rehabilitative effect, and at the same time costs municipalities, states, and the federal government tens of billions of dollars a year in needless incarceration expenses.

    5. It’s also been proven false that Uber will lose customers if it raises prices. Famed economist Steven Levitt released a fascinating paper a few months ago showing that Uber, in effect, *undercharged* its domestic UberX passengers $6.8 billion in 2015 alone. By “undercharged” Levitt means that $6.8 billion is the total extra amount Uber passengers would have been *willing* to pay in exchange for the service and convenience they receive from using Uber. (I can’t link to the article, for some reason, but you can Google it.) That said, I do agree with Scott that Uber and Lyft are basically in a war of attrition, and that they will both inevitably have to raise their rates (though this may come in the form of increase surge pricing as opposed to increases in base rates). However, I think this will have a negligible effect on their passenger numbers.

    6. Scott’s one salient point involves Uber partnering with a subprime auto lender to sell vehicles to drivers who cannot, for whatever reason, qualify for a conventional car loan. Standing on my consumer-lawyer soapbox for a second: subprime auto loans are both predatory and almost invariably screw over those who resort to using them, and I sincerely hope the CFPB reins them in considerably … though the chances of that occurring have dimmed considerably now that Trump is being inaugurated next week. Honestly, I don’t even get *why* Uber is doing such a thing, particularly now that Uber has partnered with Hertz to offer its drivers *affordable* weekly vehicle rentals (which obviously have no commitment after the rental period ends).

    Anyway, just wanted to clear up all of this.

  4. Scott Myers January 14, 2017 at 11:09 am (4 comments) #

    Hi Jeff, Having read through your entire detailed response, it looks like we have a fair amount of common ground.

    You state: Uber is a company that admittedly generates a fair amount of schadenfreude.

    Per https://en.wikipedia.org/wiki/Schadenfreude , schadenfreude means “pleasure derived from the misfortune of others.” I totally agree that Uber has generated a fair amount of schadenfreude.

    You state:
    I happen to know a lot about ride-hailing because I’m an attorney with a specialty in consumer law, and Uber/Lyft popped up on my radar for possibly anti-consumer practices — for drivers, that is — almost three years ago now. (All of the allegations proved to be false, by the way.)

    Please share with us all of the details about this that you can do so legally.

    You state:
    The tale about it being “impossible to make a profit” driving for Uber/Lyft is categorically false.

    I did not say that it was impossible to make a profit driving for Uber. It certainly is very difficult for Uber drivers to make a living wage.

    You state:
    Further, it’s an insult to the millions of people who drive for them, seeing as the argument in effect centers on the premise that their drivers are not smart enough to factor in expenses like gas and wear-and-tear and other operating expenses in determining their net earnings.

    I never stated the premise that drivers are not smart enough. The reality is many folks are desperate enough to driver for Uber who happily exploits them.

    You state:
    In reality, the vast majority of drivers for both companies work primarily during surge-pricing hours, which are roughly 8pm-4am on Fridays and Saturdays, and in some cases Thursday evenings as well (and, of course, holidays). As such, they readily net $20-25/hour or more during peak hours.

    Please cite your data for this assertion. What % of the time is surge pricing in effect? Please itemize by all cities where Uber is available. Please cite your source for $20-25/hour net earnings.

    You state:
    The notion that Uber *itself* will never generate a profit is also false, and generally being peddled by people who don’t understand the basic economics of the VC-fueled tech startup world. Like most startup companies, Uber is *intentionally* losing money in order to gain market share (as is Lyft). The admitted difference is that Uber is doing so on a scale that may very well be the largest in the annals of corporate history. One of the key *lures* of a ride-hail company to a potential investor is the fact that its basic business model has virtually no overhead: Uber and Lyft rely entirely upon cars they do not own and drivers who work on a for-hire basis. Also, they employ vastly fewer people (by this I mean office employees, not drivers) in contrast to other companies with similar valuations.

    Uber is currently losing billions of dollars per year even as they have scaled out dramatically with 85% of the US market share for ride-hailing. So are we to believe that they will make it up in volume? The key lure to the potential investors is that they think that the exploitation of the drivers will scale infinitely. I don’t think so.

    You state:
    The one major reason Uber — though not Lyft — *might* never achieve profitability is if it lets its R&D costs for its autonomous car project spiral out of control, which already occurred with them during their failed attempt to take on the Chinese market. That said, Uber can be — and already *has* been — profitable solely from its ride-hail operations; it proved its ability to do so in one quarter last year (at least domestically).

    How profitable was Uber for its ride-hail operations for this one quarter? Which quarter was this?

    THAT said, Scott is entirely correct that Uber has a huge number of competitors in the driverless-car space, and there’s no guarantee whatsoever that they’ll succeed (particularly against Google, which is not only eight years ahead of Uber in AV R&D, but is also sitting on one of the biggest piles of cash in the corporate world ($83 billion)).

    Agreed.

    You state:
    Uber and Lyft have cut their incentives for new drivers entirely in many markets, and by 80% or more in most others — which leads me to address a falsehood concerning their driver churn rates. Uber’s and Lyft’s admittedly high turnover rates are mostly attributable to them being mere “gigs” for drivers, not drivers becoming disenchanted with their work. The most common scenario for someone considering driving for one or both companies is that they already have full-time-salaried jobs — which describes over 80% of Uber/Lyft drivers, in nearly every US market — or are outside of the formal workforce entirely (e.g. they’re in college or retired), but have a short-term need to earn some extra cash for paying off credit cards, saving up for a vacation, etc. Once they’ve made whatever amount of money they need, they often exit the business immediately (which is one of its key lures: quitting is literally just a matter of turning off the app!).

    Uber needs the highest number of drivers during the ‘vomit hours’. Folks driving just for fun are not going to drive during that time. Older folks, many who have night time vision issues are not going to drive during that time. Women, in general, are not going to drive during that time. So the pool of available drivers is greatly reduced for that time, right out of the gate.

    You state:
    The notion that most Uber/Lyft drivers “loathe their jobs” or “feel like they’re indentured servants” is also false, and it stems almost entirely from disgruntled former drivers posting on various online forums, usually enabled by taxi-industry flacks who “support” them. (As is often the case, the loudest voices in the room should never be mistaken as being *representative* of everyone in the room.) The preponderance of these drivers appear to have made at least one of two mistakes with respect to driving for Uber: they tried to do so as a full-time vocation, and/or they drove in what is unquestionably the worst market in the country for ride-hail drivers: the greater Los Angeles area. Drivers there make the least per mile; pay the most for gas; get stuck in (very-low-paying) traffic jams most often; and most frequently have to “deadhead” back (e.g. take a passenger way out to the suburbs but not get a paying passenger for the return trip).

    I have researched therideshare.com and uberpeople.net sites extensively. Disgruntled former drivers and disgruntled current drivers are not a small portion of the driver universe. What you cite for LA is certainly not unique for LA.

    You state:
    As for ride-hail driving as a full-time job: it doesn’t work. Period. (This is why driving *taxis* is an all-around hellish proposition, given that nearly all taxi drivers are forced for various reasons to work full-time.) There is simply not enough passenger traffic to sustain Uber/Lyft drivers working more than around 25 hours per week; they hit the point of diminishing returns quickly after that point, and it only worsens the more they try to drive. THIS is one of the only ways a driver is likely to not generate a positive net income.

    I generally agree with this statement, but Uber has to have a critical mass of fulltime drivers who are willing to drive during the vomit hours. Uber drivers have the same ‘hellish’ proposition as taxi drivers.

    You state:
    It’s also been proven false that Uber will lose customers if it raises prices. Famed economist Steven Levitt released a fascinating paper a few months ago showing that Uber, in effect, *undercharged* its domestic UberX passengers $6.8 billion in 2015 alone. By “undercharged” Levitt means that $6.8 billion is the total extra amount Uber passengers would have been *willing* to pay in exchange for the service and convenience they receive from using Uber. (I can’t link to the article, for some reason, but you can Google it.) That said, I do agree with Scott that Uber and Lyft are basically in a war of attrition, and that they will both inevitably have to raise their rates (though this may come in the form of increase surge pricing as opposed to increases in base rates). However, I think this will have a negligible effect on their passenger numbers.

    I believe I read the Steven Levitt article as well. His assertions are theoretical. Here is what I know – it costs me about 50 cents per mile to drive my care with no waiting time, no extra cost for multiple passengers and even with the current ‘low’ fares of Uber, it would cost be at least twice as much to use its service. Granted, there are edge cases where I could avoid a parking fee, but they are few and far between. So if Uber and Lyft raise their fares in the future, they certainly will not be getting me as a customer. It is a basic economic fact – if you raise prices you will lose customers. How elastic or inelastic the supply/demand curve for this is not yet known.

    You state:
    Scott’s one salient point involves Uber partnering with a subprime auto lender to sell vehicles to drivers who cannot, for whatever reason, qualify for a conventional car loan. Standing on my consumer-lawyer soapbox for a second: subprime auto loans are both predatory and almost invariably screw over those who resort to using them, and I sincerely hope the CFPB reins them in considerably … though the chances of that occurring have dimmed considerably now that Trump is being inaugurated next week. Honestly, I don’t even get *why* Uber is doing such a thing, particularly now that Uber has partnered with Hertz to offer its drivers *affordable* weekly vehicle rentals (which obviously have no commitment after the rental period ends).

    Agreed. Uber is doing this because they have to delve deeper into the pool of potential available drivers in order to ‘grow the business’ and compensate for the driver attrition.

  5. Jeff Kirk January 14, 2017 at 10:43 pm (9 comments) #

    “It certainly is very difficult for Uber drivers to make a living wage.”

    …which goes directly back to my point of Uber drivers reaching a point of diminishing returns. Uber drivers *can* make a more-than-decent wage if they work the hours with the highest demand, of which there are rarely more than 20 per week. Also, some cities are simply more conductive to ride-hailing than others.

    “The reality is many folks are desperate enough to driver for Uber who happily exploits them.”

    No, that’s *not* reality. Uber critics tend to look at it as a “job choice of last resort.” This is simply not true for the overwhelming majority of drivers, 80% of whom already have full-time-salaried jobs with benefits. Question: do you actually *know* many – or any – ride-hail drivers? I do, and despite periodic complaints almost all of them *enjoy* what they’re doing.

    “Please cite your data for this assertion. What % of the time is surge pricing in effect? Please itemize by all cities where Uber is available. Please cite your source for $20-25/hour net earnings.”

    Dude, do your own homework! It’s impossible to calculate the percentage of time surge pricing is in effect, which to me says you don’t truly understand its foundational basis. Uber’s surge pricing is highly targeted, within as little as a 1,000-foot radius. While a 5x multiple might be in effect when, for instance, a concert lets out, a passenger seeking a ride across town can usually get one for the standard price.

    My “source” for $20/$25 net earnings per hour is pretty simple: it’s from Uber and Lyft drivers, and I’ve discussed it with dozens of them. Again, they’re not going to get this rate if they routinely work slow times of days.

    “Uber is currently losing billions of dollars per year even as they have scaled out dramatically with 85% of the US market share for ride-hailing. So are we to believe that they will make it up in volume?”

    Less than 20% of the American public has ever used a ride-hail service. Uber and Lyft still have *plenty* of room to grow (and Lyft recently announced its passenger count last year was 3x higher than previous years). There’s *plenty* of “virgin territory” for both to acquire.

    “The key lure to the potential investors is that they think that the exploitation of the drivers will scale infinitely.”

    Are you kidding? Seriously: this is such a wildly off-the-mark assumption that I have to question whether you meant it. Uber investors are playing the long game: they’re betting that Uber will dominate the future autonomous-vehicle driving space — which I don’t agree with btw. In any event, the fact that Uber and Lyft will, in the foreseeable future, eliminate human drivers altogether is both a given and viewed as a positive by investors.

    “How profitable was Uber for its ride-hail operations for this one quarter? Which quarter was this?”

    Last February (I was mistaken about it being profitable for a full quarter):

    http://finance.yahoo.com/news/uber-says-profitable-us-much-151211910.html

    “Uber needs the highest number of drivers during the ‘vomit hours’. Folks driving just for fun are not going to drive during that time. Older folks, many who have night time vision issues are not going to drive during that time. Women, in general, are not going to drive during that time. So the pool of available drivers is greatly reduced for that time, right out of the gate.”

    All true, but you basically just restated the entire point of surge pricing! No one’s going to work the “puke shift” unless they’re getting paid exceptionally well.

    “I have researched therideshare.com and uberpeople.net sites extensively.”

    I’m sure you have. That certainly explains your disjointed beliefs.

    “Disgruntled former drivers and disgruntled current drivers are not a small portion of the driver universe.”

    Ha! Uber and Lyft presently have nearly 500,000 drivers in the U.S. alone. Uberpeople’s user pool is … well, smaller.

    “I generally agree with this statement, but Uber has to have a critical mass of fulltime drivers who are willing to drive during the vomit hours. Uber drivers have the same ‘hellish’ proposition as taxi drivers.”

    True, but they always *have* that critical mass. A large percentage of drivers work *only* the “puke shift” because a) it pays so much better and b) a majority of them have full-time day jobs.

    “I believe I read the Steven Levitt article as well. His assertions are theoretical.”

    You didn’t read the article if you think his assertions are theoretical. Uber granted Levitt access to actual unabirdged trip data for FIFTY MILLION rides in various cities.

    “So if Uber and Lyft raise their fares in the future, they certainly will not be getting me as a customer.”

    You’re making the classic mistake of assuming many, if not most, people feel the same way as you do. Further, the Levitt paper directly *refutes* this argument on whole.

    “It is a basic economic fact – if you raise prices you will lose customers.”

    This is a stunningly simplistic claim, and once again it’s been disproven by the Levitt paper.

    Finally, you completely ignored a number of factors, most of all the fact that Uber’s and Lyft’s fastest-growing serviices are their carpool ones for suburban commuters (UberPool and Lyft Line). They already provide over half of all Uber rides in L.A. and SF.

  6. scott myers January 17, 2017 at 9:37 am (4 comments) #

    Hi Jeff,

    “The reality is many folks are desperate enough to driver for Uber who happily exploits them.”

    No, that’s *not* reality. Uber critics tend to look at it as a “job choice of last resort.” This is simply not true for the overwhelming majority of drivers, 80% of whom already have full-time-salaried jobs with benefits. Question: do you actually *know* many – or any – ride-hail drivers? I do, and despite periodic complaints almost all of them *enjoy* what they’re doing.

    Scott says:
    From Uber’s own document at https://drive.google.com/file/d/0B1s08BdVqCgrZWZkV0ZfZnhGUGc/view
    “Around 80 percent of driver-partners reported that they were working full- or part-time hours just before they started driving on the Uber platform.”
    It says nothing about how the full and part-time %s break out and says nothing about employee benefits. What is the source for your statement “drivers, 80% of whom already have full-time-salaried jobs with benefits”?

    My “source” for $20/$25 net earnings per hour is pretty simple: it’s from Uber and Lyft drivers, and I’ve discussed it with dozens of them. Again, they’re not going to get this rate if they routinely work slow times of days.

    Scott says:
    therideshareguy.com has just completed a survey of 1150 Uber/Lyft drivers – please see http://therideshareguy.com/rsg-2017-survey-results-driver-earnings-satisfaction-and-demographics/
    It shows an average hourly rate, before expenses, of $15,68 for Uber drivers and $17.50 for Lyft drivers. That is no where close to $20/$25 per hour net earnings.

    “Uber is currently losing billions of dollars per year even as they have scaled out dramatically with 85% of the US market share for ride-hailing. So are we to believe that they will make it up in volume?”

    Less than 20% of the American public has ever used a ride-hail service. Uber and Lyft still have *plenty* of room to grow (and Lyft recently announced its passenger count last year was 3x higher than previous years). There’s *plenty* of “virgin territory” for both to acquire.

    Scott says:
    Lyft grew by 3 times because it is still very small and still unprofitable. So what % of the American public will ultimately use Uber, and what % will use it recurrently versus for one-off events?

    “The key lure to the potential investors is that they think that the exploitation of the drivers will scale infinitely.”

    Are you kidding? Seriously: this is such a wildly off-the-mark assumption that I have to question whether you meant it. Uber investors are playing the long game: they’re betting that Uber will dominate the future autonomous-vehicle driving space — which I don’t agree with btw. In any event, the fact that Uber and Lyft will, in the foreseeable future, eliminate human drivers altogether is both a given and viewed as a positive by investors.

    Scott says:
    Well if Uber and Lyft can wait out at least 40 more quarters, they might have a shot.

    “I have researched therideshare.com and uberpeople.net sites extensively.”

    I’m sure you have. That certainly explains your disjointed beliefs.

    Scott says:
    So you think you know more about ride-hailing than Harry Campbell of therideshareguy.com?

    “Disgruntled former drivers and disgruntled current drivers are not a small portion of the driver universe.”

    Ha! Uber and Lyft presently have nearly 500,000 drivers in the U.S. alone. Uberpeople’s user pool is … well, smaller.

    Scott says:
    Of those 500,000 how many are still on their brief honeymoon, and how many of the 250,000 of those 500,000 that are left after 12 months will still be happy.

    “I generally agree with this statement, but Uber has to have a critical mass of fulltime drivers who are willing to drive during the vomit hours. Uber drivers have the same ‘hellish’ proposition as taxi drivers.”

    True, but they always *have* that critical mass. A large percentage of drivers work *only* the “puke shift” because a) it pays so much better and b) a majority of them have full-time day jobs.

    Scott says:
    Once again, please state your source for the majority that have fulltime jobs. Uber’s own paper, referenced above, makes no such claims.

    “I believe I read the Steven Levitt article as well. His assertions are theoretical.”

    You didn’t read the article if you think his assertions are theoretical. Uber granted Levitt access to actual unabirdged trip data for FIFTY MILLION rides in various cities.

    Scott says:
    So Uber and Lyft let Steven see their data. That does not make his extrapolations and assumptions facts.

    “So if Uber and Lyft raise their fares in the future, they certainly will not be getting me as a customer.”

    You’re making the classic mistake of assuming many, if not most, people feel the same way as you do. Further, the Levitt paper directly *refutes* this argument on whole.

    Scott says:
    My assumption is that if it costs three to four times as much for me to use Uber vs my own car, I will not do it and plenty of other folks will not do it as well.

    Finally, you completely ignored a number of factors, most of all the fact that Uber’s and Lyft’s fastest-growing serviices are their carpool ones for suburban commuters (UberPool and Lyft Line). They already provide over half of all Uber rides in L.A. and SF.

    Scott says:
    Good luck in scaling out UberPool – drivers hate it and many passengers don’t want to share their ride with strangers and/or have their trip times extended.

  7. Jeff Kirk January 17, 2017 at 11:15 am (9 comments) #

    “What is the source for your statement ‘drivers, 80% of whom already have full-time-salaried jobs with benefits’?”

    Alan Krueger — one of the country’s top economists, who has served (separately) as Chief Economist for both the U.S. Treasury and Department of Labor, and more recently as a member of President Obama’s cabinet and chairman of his Council of Economic Advisers — co-authored an extensive study titled, “An Analysis of the Labor Market for Uber’s Driver-Partners in the United States.” You’ll find this and other stats there:

    http://www.nber.org/papers/w22843

    https://s3.amazonaws.com/uber-static/comms/PDF/Uber_Driver-Partners_Hall_Kreuger_2015.pdf

    (And please, *please* don’t try to argue that the study is somehow “biased” because Uber helped fund it. The notion that an academic of Krueger’s caliber was somehow “bought off” by Uber — a common theory on the Uber-troll boards, which practically by default try to discredit anything and everything that’s even the *slightest* bit positive about their arch-nemesis — is ludicrous. It’s an insult both to academia in general, which has constant funding struggles even at its highest levels, and certainly one to Prof. Krueger, who’s directly served his country in (comparatively) low-paying government jobs for over a decade in total.)

    “therideshareguy.com has just completed a survey of 1150 Uber/Lyft drivers”

    The Rideshare Guy is popular amongst the taxi shill/Uber-hater contingent on sites like uberpeople.net, so I’d take any of his “surveys” with (more than) a few grains of salt, given the strong likelihood that disgruntled rideshare drivers (current and former) make up a disproportionate number of respondents.

    “Lyft grew by 3 times because it is still very small and still unprofitable.”

    Very small?? It provided over 160 million rides last year! I don’t know in which alternate universe this qualifies as “small,” but it ain’t this one. (And again, like Uber it is unprofitable on purpose, as is nearly every tech company in growth mode.)

    “So what % of the American public will ultimately use Uber, and what % will use it recurrently versus for one-off events?”

    I have no earthly idea, nor does anyone else. It’s far too early to make any such predictions.

    “So you think you know more about ride-hailing than Harry Campbell of therideshareguy.com?”

    Considerably more, as does any *legitimate* analyst of the ride-hail industry. (Harry is an Uber driver who happens to write a blog about the industry on the side. That does not qualify him as an “expert” in any way, shape, or form.)

    “Once again, please state your source for the majority that have fulltime jobs. Uber’s own paper, referenced above, makes no such claims.”

    See Krueger paper.

  8. Jeff Kirk January 17, 2017 at 11:16 am (9 comments) #

    “Good luck in scaling out UberPool – drivers hate it and many passengers don’t want to share their ride with strangers and/or have their trip times extended.”

    Ah, I’m guessing you’ve garnered this opinion from uberpeople.net and its ilk. I’ll hazard a guess you’ve never lived in a city with a subway system. I have: I used to live in NYC. Virtually without exception, EVERYONE hates the subway. And yet also without exception, EVERYONE uses it to get to and from work. The reason? It costs vastly more and takes considerably more time to travel by car, which they hate even more than grin-and-bearing it for riding the subway.

    Also, the fact that such huge numbers of people use UberPool and Lyft Line directly refutes your assumption that many passengers “don’t want to share their ride with strangers and/or have their trip times extended.” First, their trip times are *reduced*, not extended: even factoring in pickup/dropoff time, the fact that they get to use the HOV lane on the freeway still cuts their average trip length quite a bit. Second, basically no one loves sitting next to strangers, but people do so for carpooling for the same reason they routinely bear a vastly *worse* experience than riding in a car with strangers: riding on a *jet* with strangers, oftentimes in situations where they have almost no leg room and literally cannot avoid physically touching the person next to them for an entire trip. (I’m assuming said seatmate is obese, but considering 1 in 3 Americans is classified as such — plus most regular airline travelers are male — the odds of being seated next to one are fairly high.)

    I will grant you that Uber and Lyft drivers generally hate it … and yet they do it anyway. In large numbers. Think you can explain that one away?

  9. Jeff Kirk January 17, 2017 at 11:16 am (9 comments) #

    “My assumption is that if it costs three to four times as much for me to use Uber vs my own car, I will not do it and plenty of other folks will not do it as well.”

    …which means you’re making the *further* assumption — also highly fallacious in nature — that Uber and Lyft will continue to use their current revenue model for the foreseeable future. In reality:

    1. Both companies are already testing out subscription-based services, e.g. you pay a monthly fee for unlimited rides. In case you’re one of those young’un millennials who think they know it all but don’t know jack about even relatively recent history: internet use didn’t start to skyrocket until AOL switched from offering access plans based on hourly charges, to an all-you-can-eat plan with unlimited internet for $20/month (circa 1996). Ditto early cell phone plans, back when people still used them primarily for actual *voice* calls: usage skyrocketed as soon as wireless providers started offering plans with 500 or 1000 free minutes per month.

    2. Lyft has already announced that it expects to be running a 100%-autonomous rideshare network by 2025. It’s a reasonable assumption that Uber has similar plans, and possibly even more aggressive ones. By that point we will have reached the stage where multiple inexpensive means of fueling vehicles — electric, fuel cell-powered and advanced-hybrid ones — will have reduced operating costs by as much as 90% or more. (Btw Toyota Priuses are already one of the most mechanically reliable cars on the road today, frequently going 100,000 miles or more without any mechanical problems.) Subscription model or not, it will soon be dirt-cheap to use ride-hail services, and most likely far less than the expense of personal vehicle ownership.

    3. Are you *sure* it costs 3x-4x to use Uber or Lyft versus your own car? The average new car sold in America today costs around $32,000. That’s about a $500-a-month outlay right there (assuming a standard 60-month loan at a low interest rate), and it’s *before* you factor in insurance and gas, etc. It’s also for a product that, very much unlike houses, is almost literally guaranteed to depreciate in value (excluding the microscopic niche of car collectors who know precisely the right time to acquire a ’69 Mustang or something). Even if you make it to the point of paying off the car, your warranty will have likely expired by then, which will raise your repair and maintenance costs considerably — and they’ll only worsen as your car gets older.

    Oh, and the average American uses their car 4% of the time. Talk about a waste of money!

  10. Bob Thompson January 17, 2017 at 11:17 am (219 comments) #

    The New York Times, in “Drivers Become Slave to the Surge” (https://www.nytimes.com/2017/01/12/nyregion/uber-lyft-juno-ride-hailing.html), reports that

    “In New York, Uber drivers earn $25 to $30 an hour on average (twice that of cabdrivers and $5 to $10 more on average than Uber drivers earn in other American cities). But there is a downside to being your own boss: To turn a profit, drivers must plan their schedules around early-morning and late-night surges and invest as much as half of their earnings into insurance and car maintenance.”

    I’ve been using Uber for a couple of years now in the San Diego area for airport trips. I like the convenience and experience, but have wondered how Uber or their drivers can make any money when (non-surge) pricing is about 50% of taxis.

    Still, nearly all drivers I’ve met are doing it part time to make some extra money. Didn’t get a sense that they feel exploited. Most commented that they realize the earnings isn’t that much better than working at Walmart (unless they happen to get surge pricing), but they appreciated the flexibility.

    Interestingly, the only Uber driver that seemed unhappy was a former taxi driver, now driving for Uber to make ends meet. He displayed a “tips” sign and had a sour attitude.

    Seems to me that ride pricing and driver earnings is a self-correcting problem. Uber (and Lyft et all) are driving for market share by offering a better experience and lower prices, but if drivers can’t make enough, that strategy falls apart. Likewise, if Uber can’t make a profit per ride (on average) that can’t continue forever, either.

    I suppose I can thank the Uber investors for essentially underwriting the low fares I’m getting now.

    The real issue seems to when does the investor’s money (and patience) run out. Amazon lost money for years, and Bezos convinced them to wait, and wait, and wait. But there are many more examples of chasing market share and eyeballs ending badly. Companies have to learn how to make a profit eventually.

  11. Jeff Kirk January 17, 2017 at 12:23 pm (9 comments) #

    Bob, correct on all counts. It probably won’t come as a surprise that some of Uber’s biggest critics have never even *tried* it – not even once! That said, the majority of said critics — particularly those who are frequently in the press — are connected somehow to the taxi industry. In California specifically, their biggest critic in the state legislature is San Diego’s own Sen. Ben Hueso. Care to guess why Hueso is so adamantly opposed to Uber and Lyft? Wait for it: his family owns the largest taxi company in the city! (I have no idea why a state as liberal as California allows for such unequivocal cronyism in its legislature, but it is what it is.) Here’s an L.A. Times article on the subject, which also links to more coverage of Hueso’s extensive taxi-industry ties:

    http://www.latimes.com/politics/la-pol-sac-essential-politics-the-fight-within-the-california-1466543713-htmlstory.html

    “I like the convenience and experience, but have wondered how Uber or their drivers can make any money when (non-surge) pricing is about 50% of taxis.”

    Believe it or not, Uber drivers almost unilaterally make more than taxi drivers (even if they work comparatively few surge periods). This is true in every domestic market I’m aware of. The reason is pretty simple, and it’s the same in every major city that doesn’t still use a “medallion” system: taxi drivers have to pay a GARGANTUAN amount of money solely for the right to BORROW the use of a permit and/or fleet vehicle. I’m unclear of the exact history behind it — the story varies from city to city — but somehow taxi franchises convinced city councils and mayors across the country to let *them* own and control every taxi permit issued by the city, as opposed to cities issuing them directly to taxi drivers (much like standard driver’s licenses). This system has resulted in some of the most astoundingly inequitable relationships between employers and employees in the country. (NB: This is finally starting to change in a handful of markets. Austin, for instance, recently revised its taxi ordinance to allow for the creation of a legitimate taxi co-op, one wholly owned by its drivers.)

    Making matters worse for most taxi drivers, they have to pay to “sublease” a fleet vehicle and/or permit upfront: when they pick up a taxi for their shift — which is another reason they make less than rideshare drivers, which I’ll get to in a minute — they have to pay as much as $175 for 24 hours’ worth of use! In NYC, taxi drivers who don’t own their own cars have to work a full eight-hour shift before they even *begin* to recoup their initial expense for the day (and they chalk up other expenses during their shifts as well, most of all gas). To state the obvious, this system frequently results in drivers working at times when they should absolutely *not* be on the road, due to fatigue: 14- to 16-hour shifts aren’t uncommon.

    As for the shifts part: the *lack* of assigned shifts is one of Uber’s and Lyft’s biggest advantages, from a driver’s perspective. Not only can they limit their work to whatever hours each day they happen to be free — which is the reason a large majority of them only work part-time — they also don’t have to waste time sitting around waiting for fares when virtually none are to be had. They can, and do, just go home and wait for “prime time” to kick in. You’ve probably seen taxis lined up by the dozens (or even hundreds!) at airports at times like weekday early-afternoons, the reason being that — outside of NYC and maybe Las Vegas — there’s virtually *zero* business available then except for inbound airport travelers. So they wait … and wait … and WAIT, oftentimes literally for hours, for those airport rides because they can’t *not* use a car they’ve paid good money to borrow, and they have little choice other than grinning and bearing it.

    While I agree with you that Uber’s business model with respect to drivers is unsustainable — and also arguably its biggest Achilles heel (ditto Lyft) that a newer, fleeter competitor could potentially exploit — it’s still *vastly* better than the nightmare of driving a taxi. (I admittedly question why ex-taxi drivers like the one you encountered on an Uber ride appear to hold so much nostalgia for such an all-around terrible system. It kind of reminds me of Russians who still pine for the return of the Soviet Union! Seriously!) Oh, and note that nearly all American taxi drivers *also* work as independent contractors, just like Uber drivers, so they certainly aren’t getting any perks like health insurance or PTO.

    And yes, you’re absolutely right that Uber *has* to start earning a profit at some point, and given the severe decline in the amount of leeway VCs are affording “unicorns” these days, I suspect it needs to happen sooner rather than later. That said, I sometimes think their C-suite execs and investors may have deluded themselves into thinking they can keep both fares and driver pay levels low until they finally launch a fully autonomous vehicle network — without drivers revolting en masse before that time. If so, that may turn out to be the most idiotic, doomed-to-fail corporate strategy since AOL and Time Warner decided to merge.

  12. Andrew Rudin January 18, 2017 at 2:40 pm (194 comments) #

    I’m late to this discussion, but have gleaned much from the spirited commentary. One consideration that I haven’t seen mentioned is a making a head-to-head comparison of annual rental car miles driven vs. Uber/Lyft miles driven. Suppose that rental car companies conceded that market forces had doomed their business model, and all decided to immediately cease operations simultaneously by throwing in the towel a la Ringling Brothers Barnum & Bailey, could Uber/Lyft and like companies pick up the demand? What would happen to pricing? I’m guessing that if you asked three economists, you’d get four or more answers.

    If you’re talking serving transportation needs in and around urban areas, I think Uber/Lyft represent a significant business threat to car rental companies. I, too, get sick about where to put a rental car when I’m traveling, and chafe at what it costs me just to let it sit idle in a parking space. But there are many times when a rental car provides huge conveniences that Uber/Lyft can’t begin to touch. If you’re a salesperson covering a wide swath of territory in rural areas where manufacturing plants sprout in remote areas, you crave the convenience of hopping in your rental car any hour of the day or night. And your luggage and sample bags are already stowed in the trunk, so there’s no need to move them from car to car. Ugh. Similarly, try doing a two-week road trip with The Fam, or some college friends to the National Parks. Most Uber/Lyft drivers won’t be keen on dealing with kids who need to use the bathroom incessantly, or to hang around for the tailgate party, with your drinking buddies.

    But there’s another issue with Uber/Lyft that I suspect causes some (many?) to eschew their service: it’s completely trackable where a person goes – and when. No need to explain the reasons, because you’ve already guessed. That’s harder to do when driving a rental car. How much revenue is preserved for car rental companies for this purpose? I don’t know the answer, but I am certain that the VP of Marketing at Hertz or any other large agency knows the number.

  13. Jeff Kirk January 18, 2017 at 11:05 pm (9 comments) #

    Andrew, I’m not sure speculating about your hypothetical would be fruitful; you yourself explained quite well why Uber and Lyft will never fully replace rental cars, or at least not for the leisure market. If anything, the thing that will ultimately replace ALL cars as we know them are autonomous vehicles.

    I also think you’re rather drastically overestimating how many people refuse to use Uber or Lyft because they track each trip. For starters, this is done almost entirely to *protect* consumers — vis-a-vis the taxi industry’s checkered past — in the event that a driver tries to take “the scenic route” (the longest possible way to a given destination, which I’ve had taxi drivers try to pull on me more times than I can count) or, far worse, if the driver is involved in some sort of assault against a passenger. I’m an expert on the industry, and I’m pretty sure this is the first time I’ve seen such a suggestion lobbed. Further, this is one of the biggest incentives in *favor* of using TNCs; they have such a large percentage of female riders versus taxis for this specific reason. So no, I don’t think tracking is having anything but a negligible effect on car rentals.

    Further, it sounds like you’re unaware that car-rental agencies now track cars everywhere they go. Nearly all of them have explicit rules about where you can and can’t go; two examples of the latter would be across the border into Mexico or off-roading in something like a Jeep. Finally, given that cell phone usage is ubiquitous, your wireless carrier can track everywhere you go with it — even if you have “location services” deactivate (IIRC the only way to avoid *any* form of tracking is to shut off a phone entirely or put it into airplane mode) — which begs the question of why Uber/Lyft tracking you is any worse than AT&T doing so. And unlike AT&T, U/L haven’t ever handed over their data to the NSA for illegal eavesdropping!

    P.S. You’re absolutely correct about the threat faced by U/L in dense urban markets; business travelers now use TNCs more than taxis *or* rental cars.

  14. Andrew Rudin January 19, 2017 at 7:45 am (194 comments) #

    Hi Jeff: thanks for adding this information. To be clear, I made no estimates of the number of privacy-minded consumers who might be resistant to using Uber/Lyft. My purpose was to describe one of several use-case scenarios in which customers could strenuously resist Uber/Lyft for a more suitable alternative (to them). There are other scenarios, and they are likely large enough to be measurable. It is far from inevitable that Uber/Lyft will “take over” all other means of transportation, as some pundits have asserted.

    Perhaps a better title for the article would be Will Uber/Lyft Threaten the Rental Car Business Model? – and if so, how? I think the answer to the former question is emphatically ‘yes,’ and the answer to the second one is interesting to dissect.

    Still, a more fundamental question remains unanswered in this discussion: if all car rentals were suddenly unavailable, could Uber/Lyft services absorb the demand? Or, could Uber/Lyft adjust their business models to accommodate the use cases in which their services don’t presently offer a viable travel alternative for consumers of car rental services?

    I’m curious if there are comparisons of annual total passenger miles driven for Uber/Lyft and passenger car rental fleets in the US.

  15. Colin Shaw January 19, 2017 at 12:49 pm (39 comments) #

    Wow, glad to see so much debate. I, like Bob, have spoken with many Uber drivers and the ones that seem most content are the ones who are doing this for a bit of extra money. The flexibility seems the key to them. I have to admit I was being a little provocative in the title, but I genuinely have stopped using car rental as much as I did before. It such a broken Customer Experience. The real future lay in driverless cars. This is where I see Uber really winning. It takes out the whole driver issue. Anyway, good debate!

  16. scott myers January 19, 2017 at 1:41 pm (4 comments) #

    Hi Colin,

    I don’t share your certainty of Uber winning the driverless car market. It is and will be heavily competed by many companies that are currently profitable. And being 10 year out from achieving critical mass (IHMO), I don’t think Uber can do 40 more quarters of losing money, even if they were to ‘win’ or gain a plurality of the market.

  17. Jeff Kirk January 19, 2017 at 2:21 pm (9 comments) #

    Andrew, just to clarify a few matters: first, I am in complete agreement with you that “it is far from inevitable that Uber/Lyft will ‘take over’ all other means of transportation.” In fact, I’d go considerably further than that and say that the odds of Uber and Lyft alone “taking over all means of transportation” are close to nonexistent, and that it may not be clear until well into the next decade whether either company will play *any* significant role in the future of transportation. Despite their admittedly lofty market valuations, neither company has anything vaguely close to the kinds of capital and resources necessary to “run the whole shebang,” as it were.

    I also wanted to clarify that there are two entirely different “future sets” involved here: the current and near-term one, and the eventual one where autonomous vehicles (AVs) play a major role in global transportation. While Uber has recently garnered a considerable amount of media attention for its recent testing of autonomous cars in San Francisco and Pittsburgh, the fact of the matter is that it was essentially a PR stunt that the media fell for hook, line and sinker. The reality of the matter is that Google is at *least* seven or eight years ahead of them in terms of developing a market-ready AV, and — even worse (for Uber) — has an effectively limitless amount of money to spend on such an endeavor. Last time I checked, they were sitting on over $90 billion IN CASH. In contrast, Uber has cash reserves in the $4 billion range, and it’s been extensively documented how quickly they’re spending them. Worse still, their odds of raising any additional capital (in a significant quantity, at least) decline by the week — particularly if they intend to do so while maintaining their current valuation. VC funding levels have been falling for nearly 18 months now, and they show no signs of recovery in the foreseeable future. Finally, the IPO market looks grimmer and grimmer as well, and that’s *before* the inevitable market uncertainty that will come when our new president is inaugurated and as the UK exits the EU (particularly now that they’ve made clear they intend to do so fairly quickly).

    As for the specific question of Uber’s and Lyft’s combined impact on the car-rental industry: I think it’s likely that, in a hypothetical situation of all car rentals becoming suddenly unavailable, Uber and Lyft would be able to absorb the demand — with the caveat that considerable increases in surge pricing would almost inevitably result, at least in the short term. Given that both companies employ such a large percentage of part-time drivers, they could readily incentivize them to drive more often with a de facto guarantee of exponential increases in ride-hail income. That said, neither company is even vaguely appropriate for use during something like a family vacation outside of an urban area — and no, I don’t think either could adjust their business models to accommodate these use cases — so I would hazard a guess that we’d see a substantial increase in leisure travelers who simply drive themselves to vacation spots instead of flying.

    Finally, I know for certain that there are no extant comparisons of annual miles driven for Uber/Lyft and rental-car fleets, if only because I happen to be intimately familiar with U/L’s categorical resistance to releasing ANY data involving ridership metrics. At most they’ve revealed such metrics in the broadest possible sense; as an example, Uber announced last June that while it had taken them nearly five years to offer over a billion cumulative rides (on a global basis), they completed their second billion within the first six months of 2016. Lyft, in contrast, offered 160 million rides in 2016 — though to be fair, they operate in one country in contrast to Uber’s 75+ — and claims to have over 100,000 active drivers. Each company also sometimes reveals broad per-market stats (usually when it suits their immediate political or PR needs), e.g. Uber stated that it was offering over 200,000 rides per *day* in the NYC region as of September, and a month earlier said it had 40 million monthly users worldwide.

    Information they have NEVER revealed, and likely never will, includes:

    1. Their average trip length, in miles and/or time, for any metropolitan area in the world — or the average fare in any market.
    2. The percentage of rides provided at “surge” levels, or the average multiple when surge pricing is in effect.
    3. The average number of rides those 40 million monthly users take per month, and the extent to which they vary by city, region, or country — or, for that matter, time of day or day of week.
    4. The percentage of rides taken by passengers who are most likely business travelers, e.g. business casual-dressed solo travelers picked up or dropped off at an airport, or driven to/from a given hotel.
    5. The percentage of rides they are somehow entirely *unable* to facilitate, for reasons either within and/or beyond their drivers’ control.

    Anyway, I’ve gone waaaaaay off-topic, so I’ll wrap it up by saying that I think it’s a virtual given that Uber and Lyft will continue to pummel the rental-car industry in much the same way they’ve done to the taxi industry. As more and more people figure out that using Uber or Lyft to get around while on a trip (most of all business trips) generally improves their overall travel experience to a significant degree — after eliminating all the hassles inherent in car rentals, including picking one up, finding places to park it and oftentimes paying out the nose to park overnight — their ridership numbers should increase roughly proportionately to a decrease in car rentals. Remember: despite it seeming to many of us that Uber in particular has received a borderline-ridiculous amount of hype, only 20% of the American public has ever *heard* of ridesharing/ride-hailing, and obviously an even smaller percentage has ever tried it.

    Finally, I think we’ll see an “adoption curve” similar to that for cell phones. I’ll use my own parents as cases in point here: as late as 2003, my father — who conducts nearly all his business on the phone, and is routinely on it 4-5 hours per day — was reluctant to embrace the “new technology” of cell phones. He finally switched, and is now so attached to his iPhone that he never even *uses* landlines. Similar story with my mom and dad and Uber: it took me about 18 months to convince either of them to try it, but once they did they were hooked. (Note that both of them are 70ish and still in perfect health and able to drive themselves. Also, it took my dad nearly a decade to start using computers regularly, compared with a *month* for Uber!)

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