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Tuesday, February 24, 2015

A Bold Prediction made by Uber client

This past Sunday, an Uber client praised Uber and ridesharing companies similar to its car service. The client made a bold prediction that taxi services would be obsolete by 2016, suggesting all taxis would be off the road in a year. However, the UberX driver neutralized this prediction and informed this client that taxi services would remain an instrumental part of transportation for years to come.

There is no way a traditional service as archaic as taxis/cabs could disappear in a year. Unless UFOs beam up all taxis and cabs in the world, their transportation services will continue to thrive. 

What clients fail to understand is that ridesharing drivers struggle to get on the road. Ridesharing companies implement a horrible payment schedule that makes all drivers wait once a week to get paid. This represents a recurring problem for drivers who get on the road to complete trips on Monday, Tuesday and Wednesday. A significant pool of ridesharing drivers are unable to sustain driving early in the week since they invested the remainder of their income from the previous Thursday on weekend driving. Essentially, a poor payment schedule and bad cash flow system impact ridesharing drivers. 

Another problem we heard is that ridesharing drivers who experienced damage to their vehicles from drunken clients breaking doors and windows were never compensated for these repairs and lost out on a few weeks of driving. Unfortunately, these ridesharing drivers absorb the cost of repairs caused by irresponsible riders. Uber won't allow drivers to use alternative vehicles not listed on their driver account. Ridesharing drivers depend on their personal vehicles to be in good working condition to sustain driving.  

Ridesharing companies keep reducing prices and this is hurting drivers. Nonetheless, most drivers can't afford to increase their hours, to complete a larger volume of rides, and endure additional miles on their vehicles. As expected, ridesharing companies reduced prices and this influenced many drivers to reduce their hours. These drivers are no longer earning as much as in 2012-2014. Ridesharing drivers were earning good income during the beta launch and up until September 2014. 

Even so, Lyft drivers received a greater portion of their earnings in result of no commission "Power Hours" offered at high demand times. Many Lyft drivers who drove at least 30 hours per week under the old system could earn $1000+ a week. Ridesharing companies got smart; they charged 20 percent commission and included a $1 safe ride fee charged to the rider and taken from drivers to handle administrative costs. Lyft drivers see more of their earnings because of commission rebates for reaching weekly hour targets. Uber does not offer any commission rebates on UberX. Sidecar holds weekend bonuses to reward their drivers for reaching ride levels. 

Taxi drivers can survive the ridesharing movement. They can pick up passengers on any corner. Airports permit taxis to enter the "Arrival" section, which is off-limits to ridesharing drivers. Nevertheless, taxis can drive in red lanes downtown and make left turns that prohibit ridesharing vehicles. Taxi drivers receive cash and credit card tips.

On flip side, Uber hasn't revised their app to allow UberX drivers to receive credit card tips. Uber charges their UberX driver a $10 data fee on company iPhones. These iPhones are locked, disallowing download of Google Maps. UberX drivers must use their personal phones to make client calls and send text messages. Taxis charge high fares, which passengers continue to pay no matter how many promotions ridesharing companies promote on the airwaves and on billboards. 

Do you honestly believe taxis will disappear in one year? We seriously doubt it. Ridesharing clients/riders/passengers are directly responsible for submitting low stars and deactivating many drivers, These deactivated drivers can never resubmit a driver application. 

The star rating system is deeply flawed. At this pace of unexpected deactivations, the quality pool of drivers will soon diminish. Ridesharing users will begin to see inexperienced drivers on the road. In our honest opinion, ridesharing services will never overtake taxi services. That is a fact. 

There are too many challenges for ridesharing drivers to survive the long haul. Without available resources, ridesharing drivers are unable to stay on the load. Ridesharing companies collect rider fares soon after trips are completed, but they delay driver payments through making weekly direct deposits. If ridesharing drivers purchase/lease new cars, these vehicles will incur hundreds of thousands of miles in 3-4 years. Drivers are expected to pay for all fuel, repairs, maintenance and other expenses. 

Taxi drivers lease their cars from Medallion owners, who cover the cost of repairs and maintenance. Fortunately, taxi drivers don't have to depend the health of personal vehicles to drive. They can lease taxis and cabs, drive for the night, and then go home without worrying about trying to afford the cost of new brakes, tires, new axles, oil changes, and other serious repairs caused by heavy city driving. 

Ridesharing drivers are deteriorating their personal vehicles at an accelerated rate. Heavy city driving will eventually put them out of commission. Ridesharing can drive 400 miles in a 12 hour shift. They must be selective on how many days to drive, because accumulating this many miles daily will cut into profits (repairs + maintenance) and force drivers to operate at a loss (gas cost). It is a vicious cycle to keep driving and losing money. With the bleak job market blocking opportunity, many full-time drivers have no choice but to keep driving until an employer opens the door for them. 

No, taxi services will not cease operation in 2016. Taxi companies won't go out of business in 2020. Ridesharing clients don't understand the ridesharing industry enough to realize that driving personal vehicles won't make drivers profit. Driving is not profitable right now. It was once profitable until ridesharing companies increased commission and reduced prices. Furthermore, gas prices have increased almost 25% in the past month, so this will definitely reduce the supply of vehicles this Spring and Summer, unless rideshare companies decrease commission and/or hold driver promotions to make up this difference. 

It is not looking good for ridesharing drivers. Ridesharing companies are making the majority of the profits. Fortunately, Lyft is taking a stand to waive all commission this Spring to accommodate their drivers. We haven't heard any news of Uber implementing any commission reductions or holding any driver promotions to increase driver earnings. We believe only smart drivers who understand how to adjust to all these changes will continue to make good income. Rookie drivers and those who rely on hot spots will experience hourly reductions, get cheaper fares, and burn more fuel.

Taxi services continue to charge 42% more than UberX. However, these high prices don't affect their business model. Taxi drivers still can earn $300 on a 12-hour shift. This is after paying leasing, tipping dispatchers and fuel cost. These taxi drivers go home with the peace of mind that their personal vehicles are still in good condition.

Do you think the taxi industry will cease operation within the next 5 years? We doubt it. Share your insight on Twitter #RidesharingVsTaxis