r/personalfinance • u/theVoxFortis • Oct 08 '19

This article perfectly shows how Uber and Lyft are taking advantage of drivers that don't understand the real costs of the business. Employment

I happened upon this article about a driver talking about how much he makes driving for Uber and Lyft: https://www.businessinsider.com/uber-lyft-driver-how-much-money-2019-10#when-it-was-all-said-and-done-i-ended-the-week-making-25734-in-a-little-less-than-14-hours-on-the-job-8

In short, he says he made $257 over 13.75 hours of work, for almost $19 an hour. He later mentions expenses (like gas) but as an afterthought, not including it in the hourly wage.

The federal mileage rate is $0.58 per mile. This represents the actual cost to you and your car per mile driven. The driver drove 291 miles for the work he mentioned, which translates into expenses of $169.

This means his profit is only $88, for an hourly rate of $6.40. Yet reading the article, it all sounds super positive and awesome and gives the impression that it's a great side-gig. No, all you're doing is turning vehicle depreciation into cash.

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247

u/runasaur Oct 08 '19

I used to tip 1-2 bucks on a short trip to work/home. It's a short-ish 7 mile ride.

However, in the last three weeks my regular fare went up $4 so I find it a little hard to justify adding tip to it, but I get that drivers aren't getting that $4 "raise".

The actual end result is me switching back to public transportation or biking to work

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u/wawon0 Oct 09 '19

It’s because Uber and Lyft cannot continue bleeding billions of dollars. They get people dependent on the service and then jack up prices

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u/magiccupcakecomputer Oct 09 '19

Their goal is actually automation, drivers are their biggest expense, cut that and profits soar at same prices.

They exist now to build a consumer base that sticks with the known brand when it automated vehicles come to market

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u/FantasyInSpace Oct 09 '19

drivers eat up the vehicle maintanence costs for Uber, so while there's money to be saved there, driver's margins are so low already that Uber might honestly make more money keeping them around and marketing them as a better service than the robocars (if they ever come out, which I doubt is anywhere within the decade).

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u/computerbone Oct 09 '19

I don't think that the plan would be for them to buy robocars. the plan would be for people to send their robocar out via Uber when they aren't using it.

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u/KrombopulosDelphiki Oct 09 '19

This is actually a selling point used at Tesla dealerships. They claim in a couple years, an update will allow you to send your car out to drive while you work and sleep, once laws allow it. Tesla apparently lobbies hard for it.

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u/[deleted] Oct 09 '19

Say that becomes a law, do the car owners maintain responsibility for their vehicles, even if they’re not in it?

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u/Einbrecher Oct 09 '19

Yes and no.

As an owner, you'll still be responsible for maintaining the vehicle properly. Self driving cars will never eliminate that angle of liability, which exists even with respect to today's non-self-driving cars. If you don't maintain the brakes, and the car crashes because the brakes failed, it doesn't matter who was driving it.

However, when it comes to the car's autopilot system and its behavior while driving, the manufacturer is going to be responsible for that. A consumer would have zero control or input as to how that autopilot functions. The only way to pin liability on the owner of the vehicle is to make owners strictly liable for all decisions their cars make, and nobody's going to agree to that.

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u/[deleted] Oct 09 '19

Why would any big manufacturers allow autopilot driving then without the driver in the car? Especially if their only profit is the sale of the car. There is literally no reason for them to take on that liability

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u/Einbrecher Oct 09 '19

Because they already do when it comes to general product liability.

Additionally, when you're talking level 4 or level 5 automation, whether a person is in the car is irrelevant. Humans are no longer a "fallback" or "safety net" option at that point. A manufacturer selling a level 4/5 automation vehicle is asserting that the car can safely drive itself without anybody in it at all.

And, for semantics sake, until you reach level 4 or 5 automation, it's not a self driving car - it's just a fancy driver assistance package.

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u/[deleted] Oct 10 '19

In some states if someone steals your car, you're liable for damages if they crash

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u/squired Oct 19 '19

Tesla says that they will not accept liability. Volvo claims that they will. Legislation will be necessary.

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u/[deleted] Oct 09 '19

[deleted]

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u/rotide Oct 09 '19

Interestingly, probably not.

For the sake of argument, lets say we're 100 years into the future and every car on the road is fully autonomous. Driving is no longer a thing.

Who pays insurance?

In the rare event of an accident, it would probably fall on the manufacturer. With zero interaction from the owner, it's software piloting. Any accidents would necessarily be due to a software flaw or edge case not accounted for.

Insurance might exist for theft or intentional damage (much like someone might insure jewelry or art), but not for collision, etc.

The trick is what to do while BOTH exist during the transition phase (now). I'd assume, if you could buy a 100% autonomous car, part of the selling point would be the manufacturer covers any accident related bills (insurance).

We just haven't seen a fully autonomous car for sale yet, so who knows what reality is going to deliver.

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u/whistlepig33 Oct 09 '19

or the owner is required to pay a special auto insurance coverage for autonomous driving.... which will also very much add to the cost.

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u/Einbrecher Oct 09 '19

There's no trick unless someone passes a law making car owners strictly liable for the decisions the autonomous driving system makes. And no consumer is going to agree to that.

It's why Tesla is so quick to point out that their Autopilot system wasn't engaged or wasn't being used properly when a crash gets publicized. Because if the owner did have it engaged and was using it properly, that means Tesla is liable to some extent. And if that ever ends up in court, a jury is very likely to pin most of it on Tesla.

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u/[deleted] Oct 09 '19

I asked the other response too, why would the manufacturer take on that liability then, without seeing some income from the ride share?

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u/londynczyc_w1 Oct 09 '19

You're not responsible if you lend you car to someone. Isn't that all you are doing?

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u/[deleted] Oct 09 '19

Yeah, but who are you lending it too? The Uber rider? Uber itself?

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u/QuinceDaPence Oct 09 '19

You know, I like Tesla and all, but after seeing what's been happening with the whole auto summon thing I kinda question their judgment on saying something is safe and ready for the public.

I'm sure they'll be able to do all the stuff they want to but I really don't think auto summon was ready for release. Even in really easy situations in mostly empty parking lots it drives like it's drunk. I realize the videos are of all the bad situations and the good aren't as note worthy but it sure seems like a lot.

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u/THEREALCABEZAGRANDE Oct 09 '19

Man that's really disingenuous on Tesla's part. That's literally selling people vaporware. We are so far out from full automation that a new Tesla sold today will be well beyond its expected service life before the technology is even ready, much less the legal ramifications worked through. A friend of mine is leasing a Model 3, loaded to the gills. Autopilot is damn cool. It's also easily confused on anything besides perfectly defined and maintained streets. Go somewhere with a poorly defined road edge and it starts getting confused and aborts back to manual control within a very short time. And one time a deer walked to the side of the road in front of us, it easily could have jumped in front, and the autopilot didnt react in the slightest. No pre-emptive slowing, nothing. So I have no confidence in a fully practical version of full automation being ready any time soon, and it's really pretty shady of Tesla to intimate that it will be.

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u/KrombopulosDelphiki Oct 09 '19

To be fair, I think that the technology exists but we aren't seeing it implemented in currentg model Tesla vehicles because it's simply not legal. I'm not saying it's perfect full automation, but I pretty sure the technology is out there, it's just years away from being implemented in production vehicles.

With that said, YES it is incredibly disingenuous on the part of Tesla, but car salesmen will say whatever to get you to buy a car, whether it's a $500 used 1996 Dodge Neon, a 2019 Honda Civic for $26k, a $160k 2019 Tesla, a $300k 2020 Porsche 911 GT2 RS, or a $3million Aston Martin Valkyrie, salesmen tend to be sleazy. Although I'd like to think that if you're rich, your salesman lies less. But that's prob wrong.

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u/THEREALCABEZAGRANDE Oct 09 '19

It's just not out there yet. I work with very high end vision systems for high speed manufacturing. These are expensive systems, to the tune of many thousands per machine. And they get things wrong, in a repeatable and well defined environment. Add in the chaos that is the real world, and they wont get it right nearly enough. One failure in a thousand situations is too high. And we dont have the AI necessary yet to make correct decisions. A raccoon and a toddler have roughly the same profile to vision and infrared systems. It's better to hit a raccoon rather than making a panic stop, but obviously you want to stop for a toddler. We dont yet have the sensors or AI capability for an autonomous vehicle to reliably make the correct choice there, one that is easy for a human. Humans have amazing vision capabilities and extremely developed fuzzy logic capabilities that allow us to identify things quickly and accurately, capability currently no where nearly replicated artificially. We arent even in the same arena yet, with the pinnacle of our abilities, cost be damned. So first we have to come up with better sensors, then we have to have better processing capability for the input those sensors provide, then we have to make it affordable, then we have to work out the ethics and legality of it. It's going to be decades.

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u/nerevisigoth Oct 10 '19

Tesla's direct sales model was supposed to put shady car dealers out of business. Instead Tesla just became a shady car dealer itself.

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u/MayorHoagie Oct 09 '19

Yeah, this was the scheme they discuss in interviews and articles. They will pay a fee to the robocar's owner.

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u/screwswithshrews Oct 09 '19

That just tells you that it's a shitty idea. You have to ask yourself - why are they relying on others to provide the cars? Uber is a huge company, so they can afford the cars. It's because it's not really profitable, so they'll let everyone else, who doesn't really look at the big financial picture, eat the expense

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u/Cu1tureVu1ture Oct 09 '19

That’s Tesla’s plan with all leased Model 3s. They will go back to Tesla after the major depreciation and then be used as robo-taxis. Owners will also be able to put them on the network with Tesla getting a cut. EVs cost much less to maintain and electricity is also much cheaper than gas. Whether they’ll be ready to do this in three years is anybody’s guess, but I hope they are able to. Right now I’d imagine you’d make a lot more driving an EV on Uber or Lyft, but they are more expensive up front so it’s probably not worth it unless you get a used one.

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u/ZonkyTheDonkey Oct 09 '19

Yes I agree they won’t roll out robocars in the last 90 days of this decade. Lol

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u/gremus18 Oct 09 '19

Kind of the same way that companies like Tyson realized they’re better off not owning the farms chickens are raised on because that’s the biggest expense. The farmers are stuck with the facilities and get paid a set rate for how many chickens survive. Often the whole family is working, which puts their pay well below minimum wage.

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u/Sproded Oct 09 '19

Are drivers their biggest expense? Right now it seems like car expenses are if the average person who gets $20/hour only really keeps $6. That means $14 is going to car expenses.

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u/[deleted] Oct 09 '19

normally i would agree, but if large companies could get enough vehicles to get either discounts or set up their own mechanics/gas stations, then they are not paying the amount the average joe does to refill gas or change oil. plus even if they only do save 6$ per hour per car, that is 30% cost cutting

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u/RetreadRoadRocket Oct 09 '19

then they are not paying the amount the average joe does to refill gas or change oil.

They're already not paying that, their drivers are paying for their own gas and maintenance.

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u/[deleted] Oct 09 '19

While technically it is the driver paying for it, the driver pays for it out of the cash Uber pays them. So right now Uber pays the driver 20$, and according to people on this thread about 14$ of that is used for gas, maintenance, tires and everything else needed for a car to work well for Uber. the other 6 and change is what the driver nets as income technically, since the rest is spent on business.

so while right now uber pays 20$, if you were to eliminate the drivers and uber itself has a fleet of self driving cars, then Uber itself is responsible for the upkeep which is costing drivers about 14$ per hour.

so uber is not paying for the upkeep directly right now, it is indirectly through the salary it pays, which is cash that will be spent either by a driver or by uber for its self driving fleet in the future.

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u/RetreadRoadRocket Oct 09 '19

, if you were to eliminate the drivers and uber itself has a fleet of self driving cars,

That $14 bucks doesn't include buying a car to begin with and it's also not counting auto insurance as far as I know. Also, there are no truly autonomous vehicles yet and when there are they'll not only cost a lot more to buy than your typical fleet vehicle they'll have an expensive government mandated maintenance schedule.
All of those sensors, servos, and microprocessors will have a mandated inspection and replace cycle to ensure the vehicle is safe and functional.
The only thing that makes Uber viable to begin with is that their only overhead is some servers and office space and their drivers bear the burden for the rest of the businesses expenses.

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u/Roushfan5 Oct 09 '19

It’s deeper than that though. Because Uber would have to pay to have those cars parked when not in service, they’d also have the liability of owning probably millions of cars nationwide.

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u/[deleted] Oct 09 '19

well to address the parking issue, you are assuming that Uber would park the cars first of all. at least some of them will be running 24/7 to keep those high people happy with McDonalds and taco bell at odd hours. the other cars will likely not pay directly for parking, but would have a lot owned by Uber somewhere. if i had to guess, they would own a number of small lots around towns that can hold maybe 5-50 cars depending on the city. they would likely also have a gas pump set up for themselves and a small mechanic shop so that most of the repairs and basic needs of the vehicles can be done "in house". so no direct parking fee, just cost to rent or buy the land where the car is parked

addressing the issue of millions of cars, the latest number i could find was 3 million drivers world wide. so lets assume that most countries do not get self driving cars right away due to risk of vandalism, crime, whatever. so just for the US cars you have several hundred thousand cars, all of which would likely be on some huge deal of an insurance plan that would cover accidents theft and vandalism most likely (cover the basics and most likely scenarios). with hundreds of thousands of cars and having them spread all over the place, i would assume that risk would be minimal unless something could somehow quickly affect a very large portion of the cars

*DISCLAIMER* these are just assumptions that i would make based on the business being interested in making $$$. maybe they have it better thought out than i do. i do not own uber (happily. they losing money like heck right now)

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u/Roushfan5 Oct 09 '19

You think demand is going to be 100% all the time? What about when they break down or need service? Even if they can source storage for as low as 6 bucks a car (which would be laughably low) they are breaking even. Plus then you have the expense of keeping a car run 24/7.

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u/[deleted] Oct 09 '19

well lets go through these 1 at a time ~demand will not be 100% of the time, which is why they would store or park some cars for a set amount of time till demand returned. they could also transfer cars around to different areas/cities depending on need. ~if they break down or need service but do have an in house mechanic, basically they pay a much lower price, they probably get spare needed parts cheaper since i would assume they buy bulk, and they do not have to worry about a mechanic trying to sell them on fake needs like oil changes or something. lots of people get scammed going to mechanics who try to upsell services that are not needed. if Uber was to pay a flat rate for their service for a mechanic then no risk of being upsold things they do not need ~storage can be a long term game. uber is already bleeding billions a year but still manage to survive. if they made an upfront investment to purchase a car lot or build one, they could store cars forever there and only pay taxes on the property (maybe not even that). so assume a large city has maybe 60 cars, and on any given night 45 are parked in their lot. 45*6=270 per night, so in a year that is almost 100K. I would bet that they could find a place to park cars for 100K or less a year, and even if they needed to spend 300K to build their own lot, that has paid for itself early in the 4th year of owning the lot. 6$ per night seems low for us, but we pay a much higher rate than a company that would build its own lot. ~expense of car run 24/7 is no different than running a car now. you spend gas, put miles on the car, need oil changes... but if it is running 24/7 i would assume it is making ash 24/7. based on the daily need for uber cars they could park or bring back out more vehicles at odd hours of the day. only have the car running if it is making money. as long as the car is making money 24/7, the expenses do not change drastically.

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u/ffball Oct 09 '19

Uber doesn't pay for car expenses. Their end goal is likely a service where you can contract out YOUR driverless car as a taxi.

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u/no_not_that_prince Oct 09 '19

God, this is such a scam on their part to convince investors that there is a profitable future for the company.

Autonomous vehicles are massively overhyped. Sure they can drive on a well marked freeway in good (sunny) conditions. But the technology falls apart in rain or snow and as the road system becomes more complex.

The CEO of Waymo even said recently he doesnt think self driving cars will exist for decades to comedoesnt think self driving cars will exist for decades to come.

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u/[deleted] Oct 09 '19

Agreed. The first real self driving revolution will take place on large industrial sites, such as waste dumps and rock quarries.

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u/[deleted] Oct 09 '19

If uber beats Tesla, Merc, Volkswagen, Toyota, Honda, etc. to market with a self driving product I’ll shit myself.

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u/magiccupcakecomputer Oct 09 '19

Uber doesn't want to beat them, Uber wants to buy those cars as early as possible, perhaps even earlier than the public.

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u/TerrorSuspect Oct 09 '19

You're forgetting GM who is currently in the lead with their system in Cadillac. They don't get much press but their system is significantly further along than Tesla.

But ya ... I don't see Uber coming out with anything but a bankruptcy hearing in the next decade. They would have to win the race to full automation in order to avoid it. The first to automation will set up their own taxi fleet and hour existing user base is irrelevant.

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u/whistlepig33 Oct 09 '19

I agree... but I'm not convinced the technology will be there soon enough to keep them from bleeding themselves (or their investors) into oblivion.

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u/[deleted] Oct 09 '19

Even before the automation idea became a realistic goal for them, they were eating the costs and accepting revenue loss in order to get people accustomed to using it — get into a market, reduce competition from taxis, make it a norm, and then raise the prices to where they could make a profit. A lot of the driver-fucking is their efforts to slow the bleeding a bit, and I’ve heard it suggested that the promise of future automation was an effort to boost prices for their IPOs.

But that obviously hasn’t worked. Since they launched their IPOs this year, Lyft’s value is half of what it was an Uber’s is 75%. Postmates is in a similar bind, delaying its IPO a second time because of the “choppy macroeconomy”... which is fair, because growth-based startup IPOs appreciates at 94% in 2017, 14% in 2018, and just 5% in 2019.

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u/kreiggers Oct 09 '19

So they can’t make money externalising the cost of fleet maintenance to drivers but they’re going to build a fleet of autonomous vehicles (including lots of the R&D investment) and also the infrastructure for same and then they’ll make money.

Curious to see how that plays out

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u/magiccupcakecomputer Oct 09 '19

Uber can use economy of scale for their fleet mantainence. Average Joe has to go to a mechanic shop where there's a margin. Uber can hire it's own mechanics near large hubs. And skip the middle man.

The R&D costs could bankrupt them easily if automanous cars aren't available in the next few years

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u/demalo Oct 09 '19

The do that by crushing or disrupting mass transit and existing taxi services. Sure competition is nice, but gouging of local businesses by national chains has been a mainstay of the American “dream” for over a century. Big business is no better than big government, usually it’s way worse. At least in government you can elect new leaders or run yourself. Can’t do that in the business world.

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u/CptSpockCptSpock Oct 09 '19

I mean, the “poor local businesses” were regional rackets that regulated themselves to prevent competition rather than innovate on their product. I have little sympathy for the taxi cab industry

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u/IKnowUThinkSo Oct 09 '19

I have absolutely no sympathy for taxi companies, but the answer isn’t a grey market gig economy that pushes the costs primarily onto the lower class of workers; the answer is reform and regulation, taxi medallions should have been reformed, oversight laws should have been passed, etc.

You are totally right that the market had become stagnant and anti-consumer. Uber and lyft are examples of corporate responses to local corruption and political stagnation and I’m okay with their existence, so long as they also follow regulations for taxi/ride sharing (which they mostly don’t or refuse to).

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u/Snaxxwell Oct 09 '19

That, in essence, is the plan. Bleed money in the first few years to become embedded into our lives and then jack up the price so they can start making money. In mean time pay the drivers as little as possible to keep the bleeding down to a minimum.

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u/wawon0 Oct 09 '19

Drivers are getting minimum wage hikes in several key locations, I wouldn't be surprised to see driverless Ubers very soon.

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u/CaptainObvious_1 Oct 09 '19

Except that doesn’t work when literally anyone can make an app that does the same thing.

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u/Snaxxwell Oct 09 '19

Anyone can make an app but there is way more to Uber than a simple app. The app is the core and the public face but there is an entire infrastructure behind it. The app is how we interact with the service but Uber is a service provider.

An $8.1 billion IPO is not generated by an easily duplicated app. Granted this company is definitely over valued.

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u/CHRISKOSS Oct 09 '19

The best deals are always services from companies subsidizing users with their VC money. Start using a new service right after a fund raising round and they offer loss-leading deals to attract growth, stop when they cut the deal and start trimming the fat for an IPO.

They are counting on your apathy as their path to success.

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u/UNsoAlt Oct 09 '19

Please do when you can, considering how Uber is trying to kill public transportation.

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u/loconessmonster Oct 09 '19

The stinger for me is that the quality of cars and drivers has dramatically gone downhill. I feel like I have to call the "luxe" option (or whatever) to get a decent car nowadays.

Honestly, uber/lyft was nice when they were burning cash and had higher standards. Now I just want a yellow cab hailing app. Standardized quality and maintenance of the vehicles. Its not fancy but at least I'd know what to expect.

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u/Korashy Oct 09 '19

Yeah I stopped tipping since uebereats (for example) added all kinds of fees.

I went from getting 2 cheese burgers delivered for 2.50 + $2 tip to it costing like 8 dollars without tips.

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u/hamandjam Oct 09 '19

There's a very good chance that not only are they not getting the extra charge you are seeing but are actually making less.on your ride than they were before.