If fleet managers want to come out on top in the race to managing mobility, they’d be well advised to keep tabs on the unfolding fortunes of Uber and Lyft
By Andrew Boada, Editor at Large
As the ride-hailing leaders Uber and Lyft revealed when they went public, they’re betting their future on self-driving cars. The question, though, is: will they still be around as we know them by the time fully autonomous vehicles have actually arrived and are accepted by the riding public?
Perhaps more than any others, Uber and Lyft have become the most visible representatives of what’s referred to as the “Mobility Revolution,” which, in a few words, means changing from a world where people own and drive their own fossil-fueled vehicles to shared, electrified, connected and self-driving means of transportation.
For fleet managers, it means a transformation of their traditional role of managing assets to managing the way that every person who works for the organization gets from anywhere to anywhere else. Boiling it all down, it means combining fleet with the organization’s travel department, and managing expenses paid on taxis, limos, airplanes, and public transit.
Today, ride-hailing services don’t come under the purview of fleet managers. But if fleet managers are going to become mobility managers, managing the expenditures the organization covers for the Ubers and Lyfts of the world will become their responsibility.
As it is, growing numbers of employees use ride-hailing services instead of taxis, buses and subways. As a matter of fact, Uber and Lyft now account for three-quarters of corporate transportation reimbursements. And why has this happened? Because they offer a superior value proposition.
First, the car comes to the customer, not the other way around. Second, it comes on demand – no checking a schedule and waiting for the next ride. Third, unlike buses, subway and trains, it takes you from door to door. Fourth, it’s often cheaper, sometimes considerably so, than a taxi or limos.
But here’s the problem: for all of these reasons, people are getting hooked on Uber and Lyft. What happens when – as is almost a certainty – their fares skyrocket? Who’s going to be minding the store for employers? Who is going to be the watchdog who mandates cheaper forms of transportation when Uber and Lyft take more from the organization’s wallet? It’s an opportunity for those who would become tomorrow’s mobility managers.
It all comes down to the fact that the big two of ride-hailing are cash-incinerating machines that are losing billions of dollars a year. By far, their biggest expense is their drivers, which is the reason they desperately need to go driverless, and why Uber has invested so heavily in its own autonomous vehicle program.
But will self-driving vehicles arrive in time? After a rush of optimism and announcements by OEMs like GM that they’ll be on the road by next year, the consensus is that it may be up to 10 years or more before self-driving auto technology will be perfected and available for widespread use.
So, what happens to Uber and Lyft in the meantime? Their drivers are independent contractors who get no benefits and must pay for their own vehicles’ capital cost, fuel and maintenance. After those expenses, they claim they’re struggling to make a living wage, and went out on a worldwide one-day strike in protest. Their alternative is to quit, and I know of at least one who said on an airport run that she’s about to quit to take a job driving a regional delivery truck that will pay her much more.
For the foreseeable future, to remain in the ride-hailing business, Uber and Lyft face few alternatives beyond raising driver pay, which means raising fares. By how much depends on whether they can cut other costs, diversify into food delivery and auto rental services, or cull more cash from private investors. But within weeks of going public, the stock market has spoken: the prices for their stock have lost significant value (Lyft’s is down 35 percent), expressing doubt that either company can continue to survive as-is under its current business model. Shareholders are going to demand profitability and either get it or sell off their shares.
Because of their other consumer advantages, when Uber and Lyft start raising their fare, it’s unlikely to change employee demand for their services, since they pass their expenses along; but it will add to corporate transportation overhead.
So fleet managers, take heed: keep an eye on Uber and Lyft fares. Price hikes are almost certain to come. Uber and Lyft’s struggles can serve as your opportunity to enhance your role and help you add value to your company.
To repeat, fleet managers today don’t manage what their organizations spend on ride-hailing, and already have plenty to do. But if they want to come out on top in the race to managing mobility, they’d be well advised to keep tabs on the unfolding fortunes of Uber and Lyft.