Lyft and Uber Price Wars Leave Some Drivers Feeling Crunched
Scott G., a former casting director and project manager who lives in San Francisco with his wife and two kids, has driven for both Uber and Lyft since last fall. He keeps both apps running at once, as neither company requires exclusivity.
He did not want to use his full name, because many people in his life do not know he is driving for pay to help keep his family afloat.
What was once a manageable side gig to make ends meet has turned into a frustration as the two services fight for market share.
Stung by price pressure from its better-funded competitor Uber, the peer-to-peer ride-sharing service Lyft lost business in key markets to its rival over the past few months.
So when Lyft recently raised $250 million in venture capital funds, it upped the stakes in the price war. Last week Lyft mimicked Uber’s price cuts and took them a step further. It’s now giving away free rides in new markets, dropping fares by nearly 30 percent, and giving drivers all its revenue rather than taking its usual 20 percent commission.
Though Lyft was built on a reputation for being friendly and community-driven, it’s now running a version of the Uber playbook. What’s normally a $15 cab ride in San Francisco now costs closer to $10 in an UberX (the company’s low-cost line) or Lyft car.
Uber and Lyft say these price drops are boosting demand, so available drivers can be busier.
Customers like cheap rides, but some drivers are less thrilled.
“How much more can these ride-sharing companies keep undercutting each other?” Scott said. “We have a real person performing a function, not a Google automatic car. We have become the functional end of the app.”
Unlike breakthroughs in new technology or apps for your smartphone, services like Lyft and Uber rely on humans — drivers like Scott — to carry out their venture capital-fueled ambitions in this corner of the sharing economy.
“I don’t want to be the butt-end of a VC fantasy, I want to make a living,” he said. “I’m working hard.”
Scott, a high-rated driver on both platforms, has completed 3,300 rides so far. He now makes $20-$30 per hour. In previous months he made $30-$40. He said he has already put 28,000 miles on his car and redone his brakes twice — plus he paid for all that gas.
Sure, most jobs are hard work, especially in the service industry. Scott and other drivers are benefitting from the opportunity to make money in a flexible way that until recently didn’t exist. He’s lucky that UberX and Lyft have legal clearance as peer-to-peer transportation services in California, so he didn’t have to go through the traditional taxi companies to get work driving a cab — if he even would have done that.
Lyft and Uber had little sympathy for Scott’s point of view. After Lyft dropped fares 20 percent earlier this month, “drivers have seen increased earnings because of double-digit growth as far as rides and rides per hour,” said Lyft spokeswoman Erin Simpson, who said other drivers were fine with lower prices. “The general response is people were pretty happy with the spring pricing cut.”
Said Uber spokeswoman Nairi Hourdajian, “With the price reduction from January we were able to combat the usual winter slump for drivers, making the winter months super busy and profitable for partners. With lower prices, partners experienced a huge increase in the number of trips per hour.”
Scott and other drivers say lower prices have indeed increased demand. But Scott said he has observed that because Lyft and Uber are now so cheap, people in San Francisco have started using them differently. “You’re making more but you’re still working harder. After prices were cut, there were more rides and also more shorter rides. That means more travel, more stop and go, more transactions, more wear and tear. My point is, at maximum efficiency, I’m doing worse,” Scott said.
And though other drivers may be pleased with higher demand and happy customers, Scott is not the only one complaining that cheap ride-sharing now looks relatively appealing in comparison to San Francisco’s public transportation system. “Looks like Lyft is now trying to compete with the buses,” one driver named Amber wrote on the private Lyft driver forum on Facebook. “Good time to rethink this gig. Lyft has now become Walmart. Hmmm, where did that community vibe go?”
Still, much as he might gripe, Scott hasn’t stopped driving for Uber and Lyft.
“The creation of a new industry is grinding out the people doing the work,” he said. “If I can find a replacement source of income tomorrow then heck yeah, I’m done today.”