Why new modes of transportation are not yet profitable
This is an intense time for transportation in general and shared mobility companies in particular. Shared mobility companies are exploring their options, from what consumers want to what cities will accept to how to reduce the risk involved overall.
As Uber and Lyft, the most visible ride-hailing operations in the U.S., have gone public, everyone is watching their moves even more closely, especially as they continue to update their financial situations. It’s a learning experience for the entire transportation industry.
An Industry in Transition
It’s an intense time, yes, but also an exciting time, because the industry is in transition. Up until recently, the most important objective was market share: how can they get as many people as possible to use the service to prove that the technology and concept worked?
Attracting and retaining new customers and the people to drive those customers safely and efficiently has been the lion’s share of focus for these newer transportation companies — and not just for Lyft and Uber, but also car-share, bike-share, and scooter-on-demand companies.
They’ve done an amazing job. As one example, according to Uber, they have 3.9 million drivers (up from 2 million at the end of 2017) and 91 million monthly active platform consumers worldwide as of June 2019(up from 75 million in 2017). That’s a lot of people and growing.
The Cost of Being on Top
Uber and Lyft are not the only ride-share companies that have competed for attention these last few years, yet they are the ones that stand out on top in the U.S. But that success has come at a significant cost. We now know that both companies are operating at a loss (as examples, a $3 billion loss for Uber and an almost $1 billion loss for Lyft in 2018, according to their IPO filings).
These companies have shifted from needing to please only consumers to needing to please both consumers and investors. It’s more important than ever to demonstrate the viability of the business.
The Shift to Profitability
We are witnessing some growing pains. But the gig economy is and will continue to grow, as will the demand for shared mobility.
The Wall Street Journal shared a graph from Lyft in March 2019 that showed that their average revenue per rider has been increasing since late 2016, from $18.03 per rider to $36.04 per rider in the fourth quarter of 2018.
Uber shows their average revenue per rider holding steady at $9.00 over the last couple years, but their monthly active riders are going up and to the right, along with their number of riders delivered per year.
The challenges shared mobility companies are having now are surmountable. They just need to figure out a way to ensure that the investments they make on acquiring drivers and riders, and keeping them, don’t scare the market off too much.
The future looks bright. People are changing the way they get from point A to point B, and shared mobility is a big part of that. now it’s time to figure out how to make them profitable in the long run: one of the major keystones to that is in telematics data.
That’s what we’ll cover next: Three Ways for Shared Mobility Companies to Cut Costs (and Become Profitable).