Uber and Lyft Flood the Marketplace, With Predictable Results for Drivers

Have you noticed a flood of drivers in your market? If so, you’re not alone. Below, senior RSG contributor Sergio Avedian explains what’s going on, what drivers are experiencing in terms of earnings, and what drivers can do about it. Share your thoughts on driver oversaturation in the comments – what does your market look like?

There are three things guaranteed in life. Death, taxes, and Uber/Lyft cutting rates every chance they get. Drivers in Los Angeles get paid 60 cents a mile, 21 cents a minute on Uber and 80 cents a mile, 12 cents a minute on Lyft! This is 75% less than 2010! 

Why is that? Why don’t they want to keep the hard-working people who pay their exorbitant salaries on the platform by paying them fairly? Why are they taking over 50% of what the riders pay these days as opposed to 20-25% before the pandemic?

I started driving on a very part-time basis a few months ago with much success. But a couple of weeks before the holidays, I started noticing some disturbing trends. First, it was the reduction of hefty Quests and Consecutive Ride Bonuses (CRBs) offered. Quests were cut to 30 for $45 from 30 for $150 and CRBs plummeted from as high as 3 for $30 to 3 for $6.

This is typical – but more importantly, it shows that the so-called driver shortage may be coming to a screeching halt.

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Have Uber and Lyft Found Equilibrium?

When Harry interviewed Uber CEO Dara Khosrowshahi in 2021, Khosrowshahi was boasting about how well the drivers were doing due to Uber’s $250 million dollar marketing campaign to lure them back onto the platform.

Uber’s CEO was confident that drivers would rush back to get their share of the pie but complained that due to increased passenger demand there was still a shortage and Uber had to raise the fares on the riders.

Well, Khosrowshahi’s predictions may be right on the money. I have noticed a vastly different picture when I am out there grinding these days. There certainly are a lot more Uber/Lyft drivers to service the waning demand due to seasonality or the new COVID variant.

I am a passenger as well as a driver on both platforms. I take hundreds of screenshots when I drive but more importantly I check the passenger app frequently.

Why? To see where other drivers are positioned in order to get away from them, and to increase my chances of getting ride requests. This improves my Utilization Rate (UR) and consequently raises my earnings per hour.

More Cars on the Market Than Ever Before

Before the pandemic hit, drivers had a major problem. Not only were the rates low, but they were fighting each other for the crumbs left on the Uber/Lyft dinner table.

Take a look at these screenshots. These were taken all over Los Angeles at various times of the day before the pandemic hit.

The Uber passenger app only showed 8 cars, but I bet there were more. Add to that all the Lyft cars and you get the picture: Collapsing utilization rates means lower incomes for the drivers. 

When I first started driving for Uber in early 2017, my UR was over 90%. When I took these screenshots in late 2019, it was down to less than 50%!

Take a look at these screenshots below which were taken by me simultaneously at different times of the day just last weekend! Don’t they look very similar to 2019? They absolutely do!

This is proof that as drivers, we are back to fighting each other for crumbs. Lowered Quests, vastly reduced CRBs, no Surge to speak of because Uber/Lyft have flooded the market with more supply than there is demand, just like they had done before the pandemic.

The difference is that the Uber passenger app is just displaying 4 cars compared to 8 that it used to before the pandemic, but I am certain there are more than 4 cars available in the vicinity.

Lyft seems like they have 8 drivers in every square mile of the city. I definitely could tell the difference from a couple of months ago when I couldn’t take a break from ride requests. Now I have to wait 10-15 minutes for a $3.27 minimum fare!

Why Are Uber and Lyft Over Saturating the Market?

Both companies have dumped millions of cars on the roads with the promise of flexibility and freedom. The pie (demand) is just not large enough to slice it thinner than it is these days, nor has the pie (demand) grown over the past few years.

Could it be seasonality? Could it be the new Covid variant Omicron that’s at fault for passengers staying indoors? Possibly, but despite that, why are there so many drivers out on the road?

The answer could be desperation – people have to put food on their tables. These pictures repeat themselves all over Los Angeles for pretty much 24 hours a day.

Yes, you may turn on your app and get out there, like Uber/Lyft encourages you to, but your results will be very disappointing.

I am convinced that there are two utilization rates (UR), one for Uber/Lyft and a separate one for the driver. Uber/Lyft will dump all the cars on the marketplace to lower passenger pickup ETAs because that’s all they care about.

What are the two deciding factors for the rider regarding which platform to choose? Price of the trip and how fast they get picked up! 

Then there is the UR for the driver. As we all know, we only get paid for giving rides, not waiting for pings. How could Uber/Lyft executives claim that the more we drive, the more we make, when we are competing with millions of other drivers? With base mileage rates I mentioned above and UR rates collapsing, how is that possible?

Takeaways for Drivers: Is the Party Over?

Unfortunately, the party may be over for LA drivers. Are you experiencing the same in your city?

Uber/Lyft have established equilibrium or even surpassed their demand/supply goals. They have accomplished oversaturating the marketplace with cars, just like they had before the pandemic, and I am certain driver earnings will take a beating.

Now more than ever, it’s time to join the SHOW ME THE MONEY club. Don’t get out there and compete with all the other drivers you see in those screenshots for crumbs. Drive only when and where there is demand and when you are offered hefty bonuses.

I am a huge believer in driver education, but I’m not sure Uber/Lyft want veteran drivers like me to hang around. Imagine what would happen in every city if all drivers did what I do. Surge would be plentiful and Uber/Lyft would be forced to pay us what we deserve, which is a lot more than 60/21 cents in 2022!

Drive the way Uber and Lyft want you to drive and suffer the consequences!

Do you think oversaturation is a big problem and has cut down on your earnings? Or am I overreacting?

-Sergio @ RSG