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Can Uber and Lyft Survive Without Drivers? – TheStreet

demand for ridesharing services for lyft (lyft) and uber (uber) plummeted during the pandemic, for very obvious security reasons.

As the margin noted, “uber lost $1.1 billion in the last three months,” that year, “with its adjusted net income down 20 percent compared to the third quarter of 2019.”

Reading: Will uber survive

But as vaccines and booster shots became widely available last year, more people became comfortable wearing masks and calling for them.

So, in theory, everything should be fine and the ride-sharing industry should see the same recovery we’ve seen in affected industries like cruise lines and theme parks.

But according to their recent quarterly reporters, both Uber and Lyft face a major headache, one that could signal the industry is in need of a major overhaul of its business model.

why did lyft and uber stocks drop?

Lyft stock prices plunged nearly 33% in its first-quarter earnings report, reducing Uber’s holding by nearly 12% in the process.

The problem is that travel demand has returned to normal, especially as more people return to the airport and some return to work. but fewer people who never want to take people.

The big resignation has hit the ride-sharing industry especially hard. As Bloomberg points out, after the pandemic destabilized the industry, many drivers found different jobs, decided “it was better to collect unemployment benefits, or were more concerned about the risk of infection from being around passengers.”

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the recent invasion of ukraine and the resulting increase in gasoline prices have further hurt recruiting efforts.

From supermarkets to airlines, almost every industry has been struggling to hire workers and get staff back after the pandemic. they have offered higher wages and bonuses, even as many people are reportedly too exhausted and fatigued to return to work.

but the problem with lyft and uber is that there is a limit to the amount of money they can throw at people to get them to work.

The ride-sharing industry can pay workers less than taxi drivers by hiring them as independent contractors. so workers get less money, but they also have the freedom to set their own hours and stuff.

But from an industry perspective, if you spend too much on workers, you can increase the cost of a trip, thus undermining one of the main selling points of these services, which are cheaper than the alternative.

With fewer workers available, it also takes longer to get a ride, and that delay is undermining the second selling point of these services: they’re more convenient.

as bloomberg pointed out, the average rideshare in the us. uu. they cost around $20 in the first quarter of this year, which is a 45% increase compared to the same period in 2019, according to market research firm yipitdata. Meanwhile, “average wait times for the week ending April 29 were about six and a half minutes, returning to December levels when shortages were most pronounced, Gordon Haskett’s analysis of 30 cities showed.” .

uber and lyft might have to rethink something

uber had a head start on lyft, because its food delivery service uber eats saw a boost during the worst of the pandemic. But both companies still find themselves between the rock of a declining workforce and the hard place of driving up prices and eating up profits.

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Where they will go next is unclear at this point.

For now, Lyft plans to spend more on driver incentives in the second quarter of the year, with only some of the costs passed on to customers, in hopes that more people will want to return to work like the pandemic. continues to stabilize.

uber will instead focus on making the experience easier for its riders by making adjustments to the driver app, such as unlocking the ability to view fares in advance before accepting a ride, improving maps and remove errors.

While the company hasn’t announced that it will spend heavily to win back drivers, some analysts worry that it may have no choice if Lyft starts spending aggressively, which could further hurt the industry’s profitability.

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