Uber and Lyft ‘throw money’ at their US driver shortage problems

“Habitually early” Amber, who lives in Erie, Pennsylvania, recently gave herself an hour to travel six miles to her Covid-19 vaccination appointment.

“What I didn’t bank on,” she said later, having missed it, “was a complete shortage of both Uber and Lyft drivers. I tried for the entirety of the hour with no luck.”

Such experiences have become common, the ride-share companies admit, posing a significant problem as both attempt to mount a post-pandemic recovery.

Drivers have been slow to return to the platforms for several reasons, observers say, including the recent arrival of government stimulus money as well as continued concerns over health and safety. Many former ride-share drivers are also likely to have taken up new jobs in the 12 months since demand crashed because of lockdown.

Now, faced with a lack of supply to meet the rebound in passengers, the companies are resorting to “throwing money” at drivers. Uber announced on Wednesday it would spend $250m on what it described as a one-time “stimulus” package to increase incentives for its drivers in the US.

Lyft, meanwhile, has been covering the cost of rental cars, offering bonuses of up to $800 for referring former drivers back to the app, and adding extra pay when the journey to pick up a passenger takes longer than nine minutes.

“It really did remind me of the early days of Uber and Lyft when they were sort of throwing money around left and right,” says Harry Campbell, who runs The Rideshare Guy, a blog for gig workers, saying the bonuses were at levels not seen “for years”.

According to data from Apptopia, the number of US-based drivers logging on to Uber on a daily basis in the first three months of this year was down by about 40 per cent on the same period in 2020, with Lyft seeing similar supply issues.

The problems come as spending begins to return, having plummeted just over a year ago as the reality of coronavirus set in. Researchers at Edison Trends noted: “As of the week of March 29, 2021, Uber had regained 53 per cent of the ground lost in the big drop of spring 2020. Lyft had regained 51 per cent.”

The imbalance has meant users who had become accustomed to rides appearing within just a few minutes have had to deal with much longer waits. Severe shortages have been reported in Las Vegas, Cleveland, Boston, Chicago, Kansas City and many more locations. One customer in Minneapolis wondered if drivers had gone on strike. Other users noted fares had significantly increased as “surge” pricing kicked in.

The problem for Uber is particularly acute in California. Recent alterations to the Uber app — one of which gave drivers more information upfront about a trip — had resulted in a third of drivers declining more than 80 per cent of the fares offered to them. Uber said the excess “cherry-picking” had made the service “unreliable”, particularly at airports, and would soon be changed. It declined to give further details on how.

Uber and Lyft had both previously warned investors that bringing drivers back online quickly enough would be a challenge and, consequently, a revenue headwind. In February, Lyft chief executive Logan Green compared re-engaging drivers as being like “turning the Titanic”. Uber chief executive Dara Khosrowshahi described supply as the “one thing” he was worried about heading into 2021.

Campbell added that while it was straightforward for riders to open an app and pick up where they left off, a year off the road for drivers meant expired documents and background checks that needed renewing. “There’s more of a barrier to getting back on the platform,” he said.

Some drivers, noted Jefferies analyst Brent Thill, would have moved to other gig economy jobs, such as food and grocery delivery.

“Would you rather be moving things around or people around right now?” he said. “I think I would rather move things. It’s a short term imbalance — long term, we’ll get it back. I don’t believe this significantly changes the trajectory [on profitability].”

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