In this week’s round up, senior RSG contributor John Ince discusses the upcoming strikes scheduled for May 8, Uber and Lyft’s IPO troubles, and the driver hiring freeze in New York City.
Uber and Lyft drivers plan 24-hour strike to protest pay [CBS News]
Sum and Substance: Although Uber’s planned initial public offering next month is likely to turn some current and former employees of the ridesharing service into instant millionaires and billionaires, the biggest IPO in years may do much less for one party — the company’s drivers. That’s why thousands of Uber drivers in eight U.S. cities plan to turn off their app for 24 hours on May 8 to protest what they regard as the company’s stingy wages.
In Los Angeles, some 4,200 members of Rideshare Drivers United will stop taking rides for both Uber and Lyft platforms and hold a rally at Los Angeles International Airport, according to organizers with the labor group. Uber’s chief rival, Lyft made its high-profile debut on Wall Street last month.
Editor’s Note: Will you be striking on May 8? Organized protests are scheduled for: Boston, Chicago, Los Angeles, Minneapolis, Philadelphia, San Diego, San Francisco and Washington, D.C. but even if your city doesn’t have an official protest location, many cities are ‘going dark’ in solidarity with the nationwide strike on May 8.
If you do end up going to a protest, let us know! If you’re interested in organizing a group of drivers, head over to this article where Harry’s discuss how to organize drivers locally.
The Uber I.P.O. Is a Moral Stain on Silicon Valley [The New York Times]
Sum and Substance: Ride-sharing was a good idea ruined by a deeply misguided start-up culture.
In 2010, I received an email from an ecstatic employee at a start-up called UberCab. “What our tiny company is doing for San Francisco right now is huge,” he told me. The employee’s joy was contagious. Back then, as a naïve, baby tech pundit, I was prone to spinning out elaborate visions of tech-abetted progress, and the more I learned about UberCab’s bold idea, the more deeply I swooned.
Car ownership is a financial and environmental blight. Cars are one of the most expensive products we buy, but they barely get any use (most cars spend most of the day parked). UberCab — which shortened its name to Uber — was using technology to push a radical new urban vision, and it quickly became a poster child for Silicon Valley’s messianic vision. Allowing strangers to share their cars sounded crazy, but if it took off, Uber might reduce the need for car ownership and increase the utilization of each car. It could make transportation cheaper and far more environmentally friendly, and it might create sustainable jobs for many drivers.
Dumbly, I once bought into this vision. Here was a company that could credibly claim to be changing the world. It might unpave paradise and tear down the parking lots.
Boy, was I a dope. Nearly a decade later, as Uber begins pitching its business to Wall Street in advance of an initial public offering that could value the company at $100 billion, I’m sickened and saddened by my naïveté.
My Take: It’s good to see the New York Times giving voice to someone who has seen Uber for what it is. The letter ends with a lament of sorts. There won’t be much lamentation in the office of Uber or the VCs who will be getting rich in a short while when that IPO bells rings. No, the lamentation will be from those who have seen this great idea go awry – the drivers, the regulators, and anyone else who unwittingly bought into the hype. – but have little to show for it.
Want to share your thoughts about this piece with Harry at The Rideshare Guy? Respond to his thoughts on this article via Twitter!
Wow. This article is not good. I guess it’s an opinion piece but a bad one and shows a lack of understanding too.
Plenty wrong with Uber but they’ve created an amazing service on so many levels and inspired new companies and industries around the world. https://t.co/59WnGHNAIf
— Harry Campbell (@TheRideshareGuy) May 2, 2019
Uber and Lyft are locked in a price war. There are only two ways out. [Washington Post]
Sum and Substance: The market for ride sharing is starting to look like a piee ating contest where the prize is . . . more pie. Lyft went public March 29, and the stock almost immediately went into a steep decline as investors belatedly noticed that the company hadn’t made any money yet and didn’t have any clear plans to do so.
On April 11, Uber filed the prospectus for its own initial public offering. The company said it commands more than 50 percent of the ride-hailing market in the Americas and Europe — and had an operating loss of $3 billion last year, about three times as much as Lyft lost.
Think about that: Collectively, those two companies lost nearly $4 billion in a single year ferrying people — and other stuff — hither and yon….
What’s happening in the ride- sharing market is typical of industries with massive overcapacity. In those markets, whether airlines or steel, too much capacity means brutal price wars until some of the combatants are annihilated, and the victors gain enough pricing power to cover their production costs. To be sure, you don’t usually see this pattern in markets that are already dominated by only two competitors, as is the case for ride hailing in the United States. But ride sharing is special in a number of ways.
… There are only two ways that the price war can end. Either Uber and Lyft come to some sort of tacit agreement to stop selling their services below cost, or at least one of the companies goes bankrupt.
My Take: This article forces us to consider the unthinkable – that Uber and Lyft will never make money. Actually, both companies give voice to the same sentiment in their S-1 statements.
Mind you, S-1 statements are well known for showing all the warts of a company, lest investors be emboldened to sue after the IPO – just like two investor groups have already done to Lyft. Taking bets here – how many lawsuits will Uber investors file in the six months after the IPO?
Uber and Lyft Have Officially Stopped Hiring Drivers in NYC, Will Resume in 2020 [The Drive]
Sum and Substance: Uber and Lyft are no longer accepting new ride-hailing drivers in New York City. The Big Apple is one of the most important markets for the rival companies, but the city government has begun to push back against the uncontrolled growth of ride-hailing services with a one-year cap on new vehicle licenses, as well as a law mandating a minimum wage for drivers.
Uber stopped hiring new drivers in New York City on April 1, while Lyft ceased on April 19, reports Politico. In a posting on its website, Uber attributed the hiring freeze to new rules enacted by the Taxi & Limousine Commission (TLC), which regulates for-hire vehicles in New York City. An anonymous source with knowledge of the matter told Politico that Uber was specifically responding to the minimum-wage rule. Lyft stopped hiring drivers for similar reasons, according to Politico.
Legislation passed in 2018 empowered the TLC to set a minimum wage for ride-hailing drivers. The rule, which went into effect February 1, requires companies to pay drivers $17.22 an hour after expenses. According to a TLC-commissioned study, drivers previously made an average $11.90 per hour, below New York City’s minimum wage of $15.00 an hour.
My Take: These are the companies we work for. Lyft, Juno and Uber all filed lawsuits against NYC’s ruling. That apparently wasn’t enough. So now they just stop hiring new drivers. Why? Is this good for existing drivers, or bad? The complexities of rideshare companies’ strategies probably won’t ever be known to drivers.
Opinion: Uber’s IPO is even more dangerous for investors than Lyft’s has been [Marketwatch]
Sum and Substance: Uber’s bankers are getting cold feet. Lowering the anticipated IPO valuation from a rumored $100 billion to between $80 billion and $90 billion means investors are not buying the pitch as well as hoped.
We’re not surprised, and we won’t be surprised if Uber’s valuation falls even further. Anything above a valuation of around $20 billion is a rip-off and makes no sense. Whether before or after the initial offering, the valuation of this stock will likely fall hard and fast. As soon as markets wise up to the fact that this deal is nothing more than a mechanism to dump a terribly overpriced private company onto unsuspecting public investors, look out below.
My Take: This article is a bit monkish, but it hits the nail on the head vis a vis Uber’s contentious relationship with drivers. It highlights the S-1 statement where Uber calls a spade a spade.
Here it is for every driver to read … “As we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase.” In other words, don’t expect things to get better for drivers. Uber realizes they’re in a zero sum game with drivers, unless of course they were to start to raise fares so that they reflect the true cost of the service.
Readers, what do you think of this week’s roundup? Will you be participating in the nationwide strikes against Uber/Lyft on May 8?
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-John @ RSG
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