No more cheap UberPool rides for now:
Uber Technologies Inc on Tuesday began suspending shared rides on its ride-hailing platform in the United States and Canada to limit the spread of the coronavirus.Reuters
“Our goal is to help flatten the curve on community spread in the cities we serve”Andrew Macdonald, SVP Uber Rides & Platform
Not sure I buy this. If the goal was to truly flatten the curve, they shouldn’t be allowing rides at all. It’s not like a sick passenger couldn’t get the driver or the next passenger sick.
More likely, Uber is worried about what will happen if demand falls to the point that they can’t match up multiple people to share a pool. If a match can’t be made, Uber just has to take the loss and transport the sole rider at a lower cost.
Uber has previously said it will compensate drivers and delivery people diagnosed with coronavirus or placed in quarantine by health officials for up to 14 days.Reuters
That’s the right move but is sure to raise investors’ eyebrows if the number of infections is as high as some of the worst case estimates. One in 6 Americans (50 million people) were infected with the Swine Flu in 2009, after a national emergency was declared.
The sudden turn of events calls into question just how well the newly-public, ever-unprofitable American ride hailing giants would do in a recession.
Amir Efrati called the escalating series of lockdowns across North America a “serious threat to Lyft and Uber” in his latest piece for The Information:
There’s little doubt that the coronavirus crisis will eventually subside. But it’s not as certain that the two major ride-hailing giants will survive the pandemic in their current form—particularly if it persists for more than a couple of months.
But it would take a brave soul to buy either company right now. Even before the pandemic, neither company had yet turned a profit. The lockdown of residents in the San Francisco Bay Area, announced on Monday, could squeeze both firms’ revenue sharply. San Francisco is one of their biggest markets in the U.S. If the lockdowns spread to other major markets—New York, Los Angeles and Chicago—layoffs appear likely.The Information
Ride-hailing giants like Uber and Lyft were the darlings of the smartphone era, fetching sky-high valuations. But faced with the reality of the public markets, these cash-burning companies don’t look so hot –– especially in a recession.
Uber and Lyft were already facing a formidable list of problems, from basic unit economics to a contractor based business model that faced legal scrutiny in multiple jurisdictions. Now, if these lockdowns last too long, people are starting to doubt whether they’ll be able to survive in their current form.
For a decade, these tech darlings operated with an unwavering focus on growth. For a while, it seemed like the bottom line would never matter –– until suddenly it did.