I don’t see how the Uber model can ever approach the price of a taxi. Traditional taxis had purpose-built vehicles, shared garages, parts bought at wholesale, and cars on duty all day every day. Uber drivers have disposable Toyotas, pay individually retail prices for insurance, maintenance, and parts, and their vehicles are usually parked. The traditional model has the advantage on cost.
The Uber model relies on an underclass whose need for cash right now overrides any concerns they might have down the line about vehicle depreciation, the consequences of operating a taxi on a consumer insurance plan, the high self-employment tax burden, health insurance or actually breaking even after taking those factors into account.
I think the Uber model has more specifically relied on massive driver incentives and high acquisition costs.
People quit when the numbers stop making sense for them, they don't always just stay in the underclass. The high cost of acquisition and incentives they did historically reflect a lot of driver churn.
There has been a severe drop in the quality of Uber drivers and vehicles since a few years ago, I can only surmise that they have had to relax their standards hence indicating a lack of sufficient supply.
I don't necessarily disagree although I might argue, for example, that maybe Uber drivers are willing to take a smaller cut in exchange for the flexibility they have. But you make a good argument in general that there's certainly little reason to think that Uber rides should be significantly cheaper than cab rides are given a sustainable profitable business.
Uber/Lyft offer an option for someone who is already carrying the fixed costs of owning a depreciating vehicle to come into the market part-time and do some driving for income.
They also don't have to commit to set hours.
These should have the effect of increasing the supply of drivers (not to the full extent of all ride-share drivers, of course).
They also don't have to front the capital cost of a medallion.
Ride share prices are sensitive to market demand in near real-time rather than being set by the taxi commission (in some long-term relationship to supply/demand).
Combining those effects, I can easily see ride share prices settling somewhere below taxi rates and still leaving profit for all players.
>already carrying the fixed costs of owning a depreciating vehicle
Except depreciation and other costs are pretty heavily a function of miles rather than time. (Especially outside of the snow belt where the number of winters plays a big role in salt damage.)
>They also don't have to front the capital cost of a medallion.
That's true but how many places is that a big factor?
We can argue the details and you're right that it's hard to compare dynamic pricing to long-term negotiated fixed pricing.
But I'm not really making a case for exactly where pricing/costs will end up assuming sustainable ride-share businesses. I'm just saying that taxi fares in most markets are probably a reasonable benchmark whether or not ride-share on average settles a bit higher or a bit lower.
There's a huge number of people who use Uber as a payday loan who are completely unaware of finance. They just need cash NOW.
The most ridiculous one I saw was a drive with a cracked iPhone 7 Plus three days after release. In my half hour ride I saw 4 overdraft notifications and 2 please pay your bill notifications. We talked about waiting in line to get the phone and how she regretted not paying $50 for the case. She was also interested in buying a lot of stuff.
Many of them will do something stupid like trade-in their car impulsively, or total it backing into a pole where mileage doesn't really matter.
A lot of them will use the Uber gas card to get gas and then drive for Lyft to get the cash. Then next month when they need money they forgot they owe Uber and now have to drive to pay off the gas debt to Uber before they can earn anything.
I've only met three people who were willing to admit using it as a payday loan, they were all grad students. Two had financial aid delays, one blew too much money on his girlfriend.
I've also met quite a few older people (usually men) with high incomes that were laid off and need quick cash. These are often singles living paycheck to paycheck on $200k in LA and they can never figure out what to cut.
> Except depreciation and other costs are pretty heavily a function of miles rather than time.
this isn't really true of most mainstream cars. as long as people perceive the 2020 civic as an improvement over the 2019 model, a 2019 civic with zero miles will be worth less (you can verify this by visiting any dealership that still has the outgoing model in inventory). this is even more true of high-end cars until you get into stuff that's truly rare.
Sure, if I'm buying a new car I'll pay less for last year's model all other things being equal. (And the dealership will sure want to provide an incentive for me to buy last year's model.)
But if I already own a car, how long I will continue to be able to drive it is far more determined by the mileage than by how old it is within reason. This is admittedly from the perspective of someone who basically drives cars until it's no longer economically sensible to do so.
I now realize ghaff is making a different point. since they intend to drive the car until it it is not economical to maintain, the resale value doesn't really matter. this is an unusually pragmatic approach to car ownership though.
Yes, that was my point. I have never sold a car that had material resale value. (And, in fact, just donated one--which was about 20 years old.)
I do think that new computer tech-type features may be shifting the equation to make older vehicles less attractive more quickly. Although I'd argue those are probably more important for the driver than the passenger--modulo some safety features.
New England cars rust due to age. CA, AZ cars have rubber parts (mounts/seals/bushings) decaying due to heat. The latter is way less fatal to the car, but still incredibly annoying to chase down and fix (unless you just ignore them).
There's some surplus, in theory, from increasing utilization of privately-owned cars: they're a pretty huge capital investment that no one wrings 100% of the value out of. Though I don't think this counterbalances the points you bring up
The special vehicles thing is very rare. London is the only place I have ever seen it (though admittedly I have yet not been everywhere). Everywhere else, taxis are just regular cars with a meter and a taxi sticker on them.
They've adjusted but limo companies also used to gravitate towards the various body of frame models including other variants on the Crown Victoria. Apparently they were very attractive for high-mileage uses because of maintenance/rebuilds.
